Germany to overhaul green energy subsidies as Berlin phases out fixed solar tariffs

Germany is completely overhauling its world-renowned support program for wind and solar power as the federal government re-evaluates its two-decade-old energy transition policy.

Introduced under the Renewable Energy Sources Act (EEG) passed in the mid-2000s, feed-in tariffs guaranteed households and commercial operators 20-year contracts worth hundreds of euros per megawatt-hour of electricity generated, designed to kickstart the deployment of green energy capacity.

Although the generosity of these contracts has diminished since the late 2010s, a “lock-in effect” means the program still costs Berlin approximately €15 billion per year.

This financial burden is set to persist in the coming years, as solar panel owners are routinely paid prices significantly above market rates for their electricity, regardless of the time of day.

Following an agreement reached late Tuesday within the governing coalition, amendments to two key pieces of legislation—the EEG and separate statutory rules governing electricity grid access—are expected to fundamentally transform the sector.

Blow to rooftop solar installations

Speaking in Berlin on Wednesday, Energy Minister Katherina Reiche said: “We are embarking on a paradigm shift. We are putting an end to the EEG as an all-encompassing, seamless package.”

Fixed subsidies for rooftop solar panels will be phased out over the next 36 months and replaced by “contracts for difference,” the new European Union norm for renewable energy support.

Under this framework, minimum and maximum earnings will be capped. The new system will take effect for all new contracts beginning in January 2027.

To prevent overloads in the electricity system, smaller solar installations with a capacity of up to 100 kilowatts will be prohibited from feeding more than 50% of their output into the grid during peak hours. Failure to restrict generation would otherwise force grid operators to implement costly intervention measures.

Revisions to grid connection regulations will also penalize companies installing solar panels or wind turbines in areas where the grid is already congested.

“Costs previously borne by taxpayers will now have to be covered by grid operators,” Reiche stated.

Initially, a draft proposal put forward by the Christian Democratic energy minister would have exempted renewable energy operators from compensation if their wind turbines or solar panels were shut down for grid stability—for the first ten years following installation.

Following intense backlash from the renewable energy lobby, the rule will remain in effect but will apply to fewer regions, for a maximum duration of six years, and will not exceed 20% of annual production.

Green sector voices strong opposition

The renewable energy lobby swiftly criticized the reforms, arguing that they establish a subsidy framework hostile to the industry.

BEE, the umbrella organization representing wind, solar, and bioenergy companies, described the package as “disappointing for a progressive, resilient, and affordable energy system.”

Solar power association BSW, whose members stand to suffer the greatest financial impact, stated that the “proposed cuts jeopardize billions of euros in investment and put tens of thousands of jobs across the solar value chain at risk.”