Germany's Reiche waters down renewable subsidy cuts: small solar gets transition payments, grid compensation softened

Revised drafts sent to states

Economy Minister Katherina Reiche (CDU) sent revised draft laws for the EEG reform and the so-called grid package to states and associations on Friday evening. The drafts soften several of the cuts she had proposed in January, which had drawn sharp criticism from coalition partner SPD. States and industry groups now have until 22 July to submit comments, and the cabinet is expected to approve the laws on 29 July.

Small solar transition payment

Under the new draft, operators of small rooftop solar installations will not lose their feed-in tariff abruptly. Instead, new plants with a capacity of up to 50 kW that go into operation in 2027 will receive a fixed payment from the grid operator for three years, set one cent per kilowatt-hour below the current regular tariff. For installations starting in 2028, the payment applies only up to 25 kW, and in 2029 only up to 7 kW. From 2030, no such transition payment is planned. After the transition period, operators must sell their electricity directly on the market, for example through a service provider at power exchanges. The ministry said the buffer is needed because structures for direct marketing by small producers do not yet exist.

A sufficient amount of wind energy is to be built in southern Germany.

Grid compensation softened

The grid package aims to steer the expansion of wind and large PV plants to avoid overloading transmission lines. Reiche had originally proposed that network operators could designate areas as "capacity-limited" and that new plants in those zones would receive no compensation when forced to curtail output. The revised draft keeps the capacity-limited designation but reduces compensation rather than eliminating it. A new peak-shaving mechanism will also cap the feed-in power of new installations at the planning stage. Additionally, compensation will now only be forfeited when curtailment in a region exceeds 5% of production, up from the previously planned 3% threshold.

Wind and biomass targets

The draft maintains the goal of adding 12 GW of wind capacity by 2029 and includes incentives to distribute turbines more evenly across the country, explicitly aiming to increase wind build-out in southern Germany. The biomass expansion target has been raised from 8.4 GW to at least 9.5 GW by 2035. The ministry said this would provide sufficient volumes for existing plants whose original 20-year EEG subsidy expires in the coming years and that want to invest in further flexibility. The overall target of 80% renewable electricity by 2030 remains unchanged; the share stood at 58% in 2025.

Political pushback and next steps

The original January draft had been blocked by Finance Minister Lars Klingbeil (SPD) and Environment Minister Carsten Schneider (SPD), who feared it would slow the energy transition. Schneider repeatedly criticised Reiche publicly. The revised drafts reflect months of intra-government negotiations. BDEW chief Kerstin Andreae welcomed that a draft was finally available but stressed urgency.

The energy industry and investors have been waiting for this for months. Time is pressing.

She noted that the European Commission must approve the EEG under state-aid rules before projects can be financed from January. The cabinet decision on 29 July is the next milestone.