Reactive power is central to voltage control in the grid. With Section 12h of the German Energy Industry Act (EnWG), the legislature already paved the way for the market-based procurement of this ancillary service back in 2020. In practice, however, the market is still in its infancy: tenders have only been rolled out gradually in individual grid regions since 2025. Yet, an evaluation of the tenders conducted so far reveals structural deficits. More than half of them went unawarded. Price caps vary widely, and key information, such as expected dispatch volumes, is missing.
Unused potential to lower system costs
If the existing potential of decentralized installations remains unused, grid operators will have to invest more heavily in their own, usually more expensive, compensation facilities. Since these investment costs are regularly passed on to electricity prices via grid fees, an efficient market would directly reduce grid costs for both industry and private households.
“We can see that the market fundamentally works, but is currently far from exploiting its full potential,” says Dr. Frank May, CEO of Alterric. “If we make adjustments here, we can make better use of existing installations and noticeably reduce costs in the electricity system—including grid fees.”
The study shows that a lack of standardization and low transparency in particular make it difficult for providers to participate. Short lead times, inconsistent tender designs, and low planning certainty limit investment and competition. As a result, existing technical potential remains untapped, such as the additional provision of reactive power from existing wind farms.
Dr. Henrik Schwaeppe, study lead at E-Bridge Consulting: “The market for reactive power is still in the early stages of its development. Initial results should therefore not be prematurely interpreted as a yardstick for its long-term potential.”
Four measures can be implemented in the short term
The study identifies 11 concrete measures to increase the efficiency of the reactive power market. Four of these can be implemented in the short term and without requiring regulatory changes:
- Standardized contracts across different grid operators,
- Centralized publication of tenders,
- Estimated dispatch volumes included in tenders,
- and the transparent publication of tender results, for example, as part of a monitoring report by the Federal Network Agency (BNetzA).
Other measures aim to increase investment security and improve predictability, for example through longer tender periods or full remuneration for reserved capacity.
Renewables as system actors
It is becoming increasingly clear that renewable generators are now capable of reliably providing system-critical services. Installations such as wind farms can provide reactive power with relatively little additional effort, thereby securing the stability of the power system, which is critical for Germany’s position as an industrial hub.
Alterric is already putting these capabilities into practice: since April 2025, the company has been supplying reactive power from a portfolio of wind farms and supplementary technology, and participating in corresponding tenders. The experience gained from these operations has been incorporated into the study.