Germany's cabinet to approve energy reform: Reiche pushes grid synchronization and cost cuts
Economy Minister Katherina Reiche's plan to tie renewable expansion to grid capacity and slash redispatch costs goes to cabinet today, with the EU's state aid approval for the current system expiring at year's end.
Why the reform is urgent
The state aid approval for Germany's current renewable energy support system expires at the end of 2026. Without a new regulation in force by then, newly built plants could still be commissioned but would not receive subsidies, according to the Federal Association of Energy and Water Industries (BDEW). Economy Minister Katherina Reiche (CDU) has made clear she does not want to risk an interruption.
We do not want to risk an interruption.
Months of negotiations within the federal government, chiefly between Reiche's ministry and the environment ministry led by Carsten Schneider (SPD), have produced a package that the cabinet is expected to approve today. Once adopted, the changes still require clearance from the EU Commission.
- Cabinet expected to approve energy reform package
- EU state aid approval for current support system expires
- Target of 80% renewable electricity share
The grid bottleneck problem
More than half of Germany's electricity already comes from renewable sources, and Reiche is sticking to the target of 80 percent by 2030. But the rapid build-out has outpaced grid capacity. Wind and solar plants are frequently curtailed because local networks cannot absorb the power they generate. These interventions, known as redispatch, cost billions of euros each year in compensation payments.
Grid expansion is meant to carry wind power from the north to consumption centres in the south, yet the draft law notes that obstacles still lead to realisation periods of eight to twelve years. "The grid expansion often cannot keep pace with the addition of new plants," the draft states. Reiche therefore wants to synchronise the two processes.
Hot Spots and cost reduction
The core mechanism is a better regional steering of new installations. Grid operators will be required to designate "Hot Spots" where a high share of generation has to be curtailed. In those areas, redispatch compensation will be eliminated, though a cap on the loss is planned, set at a certain percentage of the plant's annual electricity yield.
The draft law argues this will lower redispatch costs and relieve electricity consumers from the resulting higher bills. Reiche contends that the EEG subsidy currently compensates taxpayers for electricity that cannot even be used. Grid operators in Hot Spots will also be obliged to prioritise network optimisation, reinforcement and expansion.
Political friction and the 2030 target
The reform is controversial. Energy and environmental associations accuse Reiche of slowing the energy transition. Inside the government, the months-long talks with Schneider's ministry underscored the tensions. The federal budget for 2027 sets aside around 16.5 billion euros for renewable energy support, a sum Reiche wants to bring down.
Reiche argues that renewables have "grown up" and must now bear more financial responsibility as well as responsibility for the power grid. The keyword is "systemdienlich" (system-serving). From the economy ministry's circles, the message is that the EEG should no longer be a "Rundum-Sorglos-Paket" (all-round carefree package).
If the cabinet approves the draft today, the bill moves to the Bundestag, where further changes are likely before any final vote.
