On 29 July 2026, the German Federal Cabinet approved the draft “grid connection package”. The package would amend the Energy Industry Act (Energiewirtschaftsgesetz, “EnWG”), the Renewable Energy Sources Act (Erneuerbare-Energien-Gesetz, “EEG”), the Offshore Wind Energy Act (Windenergie-auf-See-Gesetz), the Combined Heat and Power Act (Kraft-Wärme-Kopplungsgesetz), the Power Plant Grid Connection Ordinance (Kraftwerks-Netzanschlussverordnung) and the Electricity Grid Charges Ordinance (Stromnetzentgeltverordnung). Its aim is to improve the cost-efficiency of grid expansion while strengthening grid stability.
Background and objectives
Connecting generation, storage and demand-side facilities to the electricity grid is becoming increasingly challenging. In addition to the expansion of renewable energies and the electrification of heating and transport, growing demand from large-scale battery storage systems and data centres is placing increasing pressure on available grid connection capacity. According to the Federal Ministry for Economic Affairs and Energy (Bundesministerium für Wirtschaft und Energie, “BMWE”), distribution and transmission system operators are receiving such a large number of grid connection applications that only a fraction of the proposed projects can be realised. To date, system operators have also lacked the legal authority to prioritise or deprioritise grid connection requests.
This situation is likely to worsen, as grid expansion is unable to keep pace with the construction of new facilities. Particularly in congested areas, the connection of additional facilities may have adverse effects, including increased redispatch costs and, ultimately, higher costs for end consumers. At the same time, grid connection requests are generally processed on a first-come, first-served basis. This approach makes it difficult for system operators to manage grid connections in a way that serves the needs of the overall system and, in the absence of quality criteria, to distinguish effectively between viable projects and speculative requests.
Against this backdrop, the coalition agreement between the CDU/CSU and the SPD also calls for a better alignment of capacity expansion and grid development. At the same time, the proposed reforms seek to create incentives for the development of energy storage facilities and renewable energy installations where they benefit the grid. The package also aims to streamline and modernise existing procedures, in particular through the digitalisation of the grid connection process.
Legislative process
The BMWE unveiled an unofficial draft bill proposing amendments to Germany’s energy industry law in early February 2026. A revised draft bill was circulated for consultation with the federal states and industry associations in July 2026.
On 29 July 2026, the German Federal Cabinet adopted a draft Act to amend Germany’s Energy Industry Law to Synchronise the Capacity Additions with Grid Expansion and to Improve the Grid Connection Procedure (cabinet draft).
Key provisions of the draft bill
- Standardisation and transparency of transmission system processes: Section 17a EnWG (draft) introduces a more formalised and uniform procedure for connections to the transmission system. Transmission system operators are to jointly develop transparent and efficient processes for non-discriminatory grid connections and submit them to the Federal Network Agency (Bundesnetzagentur) for confirmation by no later than 1 January 2027. Once confirmed, the processes must be published and implemented within three months.
- Standardisation and transparency of electricity supply grid processes: In future, grid operators will be required to publish available grid connection capacity online (section 17c(1) EnWG (draft)). In addition, from 1 January 2028, they must offer a process for providing information on grid connections with a nominal capacity of at least 135 kilowatts (section 17c(2) EnWG (draft)). This is intended to facilitate the selection of suitable sites for new facilities. With regard to grid connection requests, operators must also provide information on the procedural steps involved as well as on the status and progress of the relevant request (section 17d EnWG (draft)).
- Digitalisation of electricity supply grid processes: The draft places particular emphasis on the digitalisation of the relevant processes. Accordingly, operators must publish on their website both the information specified in section 17c EnWG (draft) – as described above – as well as general information relating to the process. It will also be possible to submit grid connection requests digitally in future. From 1 January 2028, every electricity distribution system operator must ensure that the entire process, from the submission of a grid connection request to the commissioning of the grid connection, can be carried out digitally. Operators may also choose to conduct the process exclusively in digital form.
- Grid areas with limited capacity: The new section 14(1d) EnWG (draft) introduces the option of designating grid areas with limited capacity for up to six years as a key instrument for electricity distribution system operators. Such designation is contingent upon active power generation having been reduced by more than 5% in the previous calendar year as part of generation adjustment measures. The designation must be notified to the Bundesnetzagentur and published together with an explanation of the underlying reasons. However, it must be revoked without undue delay where the 5% requirement has not been met for three consecutive calendar years. In designated grid areas with limited capacity, system operators will no longer be required to connect new renewable energy installations to the grid. Instead, for as long as the designation remains in effect, they must offer applicants a grid connection agreement for the relevant installation. However, under such an agreement, the applicant will be required to waive compensation for generation adjustment measures under section 13a(2) EnWG, subject to a cap of 20% of the total electricity generated by the installation in any given year. The BMWE expects this measure to reduce redispatch costs associated with renewable energy generation.
- More effective expansion of energy supply through prioritisation: Various measures aim to direct energy infrastructure development more effectively towards locations where it provides the greatest benefit for the grid as a whole. Designating a grid area as having limited capacity is intended to prioritise grid expansion in that area. In addition, transmission system operators will be able to rank grid connection requests through a standardised process, rather than applying the first-come, first-served approach.
- Construction cost contributions by operators of generation facilities: Under section 17 EEG (draft), system operators will be entitled to require operators of renewable energy installations to make construction cost contributions towards the costs of optimising, reinforcing and expanding the grid. This measure aims to promote a more efficient allocation of limited grid connection capacities and influence the regional distribution of new projects. By making the construction cost contributions region-specific, the draft seeks to create incentives for developers to locate projects in areas where additional connections can be more readily accommodated by the grid.
- Feed-in grid: The draft introduces a statutory definition of the term “feed-in grid” in section 3, no. 18 EEG (draft). The aim is to facilitate the coordinated and bundled grid connection of multiple renewable energy installations, i.e. wind and solar farms. Grid infrastructure, such as substations, is to be built in areas where future expansion of generation capacity is anticipated. By allowing system operators to take a proportionate share of grid expansion costs into account when determining the most cost-efficient connection point for feed-in grid connections, the draft seeks to create economic incentives in favour of feed-in grid solutions.
Criticism
The draft grid connection package has drawn criticism for a number of reasons:
- EU law compliance of the reduction in redispatch costs: The original draft bill required operators of renewable energy-generating installations to waive not only 20% of the financial compensation payable in the event of generation adjustments (section 8(4) EEG (draft)) but their compensation claim as a whole (“redispatch reservation”). Both the content and terminology of this provision have now been revised in the new draft: rather than referring to the “lapsing” of the claim, as the previous draft did, it now provides for a “modification” of the claim, which is limited to a partial waiver. This departure from the original redispatch reservation reflects serious concerns regarding its compliance with EU law, with stakeholders arguing that it was incompatible with the Electricity Market Regulation and the Electricity Market Directive.
- Shifting of risk to the renewable energy sector: There is also the structural question of whether the risks associated with sluggish grid expansion should be borne by the renewable energy sector or remain with the system operators, which are responsible for grid expansion. The draft itself acknowledges that this has so far failed to keep pace with requirements.
- Compatibility with renewable energy expansion targets: Critics also argue that certain provisions of the grid connection package – in particular the introduction of a partial waiver of redispatch compensation and the requirement for operators of generation facilities to contribute to grid expansion – place additional burdens on the renewable energy sector and could therefore slow down the expansion of renewable energies in the long term.
Conclusion
The Cabinet’s decision of 29 July 2026 marks a key milestone in the legislative process for the grid connection package, with parliamentary deliberations now set to follow.
It remains to be seen whether there will be further changes and whether the package – even in its current toned-down form or as further amended during the legislative process – will be compatible with EU law. It is also unclear what impact the package will actually have on the expansion of renewable energies (article in German only).
For installation operators, the key questions will be how the new grid connection framework is implemented in practice and which types of projects transmission system operators choose to prioritise in the future. Stakeholders should therefore closely monitor further developments.
Forward
