Germany debates EEG reform amid solar subsidy concerns

The German Bundestag is currently debating amendments to the Renewable Energy Sources Act (EEG) and a new grid package. A central issue involves the implementation of a profit-sharing mechanism, such as two-sided Contracts-for-Difference (CfD), which is required by the European Commission to satisfy state aid rules.

While this mechanism fulfills EU requirements, it has stalled previous promises made under Solar Package 1. Specifically, planned increases in remuneration rates for large rooftop photovoltaic (PV) systems and higher auction volumes have not yet been implemented because the EU had not granted aid approval pending the profit-sharing mechanism.

The Energy Watch Group has warned that if the current cabinet draft is implemented in its present form, it could lead to a halt in new solar installations. Such a slowdown could increase wholesale electricity prices in Germany by up to 4 cents per kilowatt-hour, potentially costing the economy 25 billion euros annually. The organization suggests that failing to expand renewables would force a reliance on expensive fossil fuel power plants to meet rising demand from AI data centers, electric vehicles, and heat pumps.