Germany’s EEG 2027 Draft: A new Era for Renewables

Germany's energy transition is set to enter a new phase. A draft bill for a fundamental reform of the Renewable Energy Sources Act (Erneuerbare-Energien-Gesetz – EEG), slated to come into force on 1 January 2027, has been released by the Federal Ministry for Economic Affairs and Energy. The EEG 2027 aims to make the expansion of renewables more planned, cost-efficient, grid-compatible, and market-oriented, moving away from long-standing subsidy models toward a more integrated system.

The draft law marks a pivotal shift in Germany’s approach to supporting renewable energy, with significant implications for investors, project developers, and plant operators. Here are our five key takeaways:

1. No More Fixed Feed-in Tariffs for new Small-Scale Plants

In a significant departure from the original EEG model, the draft bill abolishes the fixed feed-in tariff for new plants. Going forward, all new plants, regardless of size, will be required to participate in direct marketing (Direktvermarktung) if they wish to feed electricity into the grid. The draft goes a step further by completely discontinuing subsidies for new installations under 25 kW. The ministry's rationale is that falling costs have made many of these small-scale systems, particularly rooftop PV, economically viable through self-consumption alone. The long-standing "produce and forget" model for smaller plants is officially deemed "no longer contemporary." This move signals a clear push towards greater market responsibility for all producers.

2. Introducing Two-Sided Contracts for Difference (CfDs)

A cornerstone of the reform is the introduction of a mandatory two-sided CfD mechanism for all new subsidized plants with an installed capacity of 100 kW or more. This fundamentally alters the risk and reward profile for renewable energy projects. While plant operators will continue to receive a market premium when the annual market value of electricity falls below their subsidized bid price, they will now be obligated to pay back any revenues exceeding that price in "high-price phases."

This "refinancing contribution" (Refinanzierungsbeitrag) aligns Germany’s support scheme with new EU electricity market rules and state aid requirements. While this change caps the upside potential for operators, it offers greater revenue certainty, which could lower capital costs and de-risk investments. Biomass plants are the only technology exempt from this new clawback mechanism.

3. A Stronger Push for System Integration and Storage

The EEG 2027 places a strong emphasis on synchronizing renewable energy expansion with grid stability. A key measure is a new permanent cap on feed-in power for smaller solar installations, limiting them to 50% of their installed capacity. This creates a powerful incentive for operators to install battery storage, allowing them to capture solar power generated during midday peaks and feed it into the grid during evenings when demand and electricity values are higher.

To support this increased market interaction, the mandatory rollout of smart meters will be expanded to include all generation plants with an installed capacity of more than 2 kW, a significant reduction from the previous 7 kW threshold. This ensures that even smaller plants have the necessary digital infrastructure for direct marketing.

4. Implementing the Net-Zero Industry Act: The Dawn of "Resilience Tenders"

To implement the EU's Net-Zero Industry Act (NZIA), the draft establishes the legal framework for "resilience tenders" for onshore wind and large-scale solar projects. These auctions will incorporate non-price criteria to evaluate bids, aiming to strengthen the European energy supply chain's resilience and reduce strategic dependencies.

While the specific qualitative criteria are yet to be defined in a separate ordinance, this move signals a shift beyond pure price competition. Bidders will likely need to demonstrate contributions to supply chain diversification, cybersecurity, and sustainable business practices. The initial annual volumes for these tenders are set at 3,500 MW for onshore wind and 500 MW for solar.

5. Revised Auction Volumes

While the government maintains its ambitious goal of reaching an 80% share of renewables in gross electricity consumption by 2030, the draft adjusts the strategy to get there. To enhance cost-efficiency, there will be a stronger focus on large-scale ground-mounted solar plants, with their annual auction volume increased to 14,000 MW. Conversely, the auction volume for rooftop solar systems will be reduced.

Furthermore, the draft provides a clear perspective for flexible bioenergy plants, which are seen as a vital complement to intermittent wind and solar power. Auction volumes for biomass will be moderately increased and extended to 2032, providing a stable outlook for existing and new plants.

Outlook

The EEG 2027 draft represents the most significant transformation of Germany's renewable energy support framework in years. By embracing market-based mechanisms like CfDs and mandatory direct marketing for all new assets, the legislation seeks to prepare the German electricity system for a future dominated by renewables.

For project developers and investors, the changes bring both challenges and opportunities. The new framework demands more sophisticated business models that integrate storage, self-consumption, and active market participation. While the draft bill is still subject to the legislative process and may see further amendments, market participants should begin preparing now for this new, more dynamic regulatory landscape.