EEG-E 2027 & Grid Package Shifting Investment Incentives for Renewable Energy Sources

While the EEG-E 2027 focuses on the cost-efficient expansion of renewable energy sources (RES), the Grid Package aims to align RES growth more closely with spatial grid capacities and improve the grid compatibility of new plants. However, these measures also carry risks of higher bids, undersubscribed auctions, and consequently, rising EEG costs.

In the analysis titled “EEG 2027: What’s Next for Renewable Energy Sources?”, a team from the EWI investigates how selected measures in the EEG-E 2027 and the Grid Package affect investment decisions. The focus is on measures that directly or indirectly influence price bids in auctions, which are critical for the continued expansion of RES and the development of EEG costs.

Direct and indirect measures influence price bidding

Indirect measures from the EEG-E 2027 affect price bids via the design of auction parameters. These include adjusted maximum values, auction volumes, and the introduction of resilience auctions. If competition in the auction remains strong, these measures can continue to facilitate cost-efficient bids. However, if competition wanes, bids may rise toward the maximum values, and increased auction volumes could exacerbate undersubscription.

Measures with a direct effect on price bids originate primarily from the Grid Package and include the introduction of cable pooling within the scope of prioritizing grid connections, the introduction of grid connection charges for producers, and the introduction of the redispatch reservation in capacity-limited areas. The price bid under competition roughly corresponds to the levelized cost of electricity (LCOE), which relates the annualized total costs to the expected full-load hours. Cable pooling can lower the capital costs of the grid connection by allowing multiple plants to use the same grid connection point. As a result, price bids may turn out lower. Grid connection charges describe the one-time contribution of the plant operator to the grid expansion costs and increase capital costs, particularly at grid-critical locations. This can make grid-favorable locations more competitive. In the case of the redispatch reservation, the connection of new plants in capacity-limited areas occurs only if financial compensation for redispatch is waived. Thus, it influences the expected remunerable hours and increases the revenue risk for the operator, causing the price bid to rise.

Two-sided Contracts for Difference change bidding logic

A central change in the EEG-E 2027 is the introduction of two-sided Contracts for Difference (CfDs). Unlike the floating market premium, revenues exceeding the strike price (the individual price bid) are skimmed off if the technology-specific annual market value is higher. This skimming is dynamic: operators are guaranteed a minimum revenue equal to their marginal costs every 15 minutes. The hourly constant repayment in kWh is calculated retroactively for one year based on the difference between the technology-specific annual market value and the bid value.

Under the previously floating market premium, expected surplus revenues from high-price phases could lead to bids below the Levelized Cost of Electricity (LCOE). Two-sided CfDs limit these surpluses. “Assuming existing competition in the auction, it is expected that price bids under two-sided CfDs will be higher than under the floating market premium. How much higher depends on the individual ratio between the lost surplus revenues and simultaneously changing capital costs,” says Dr. Lisa Just, who conducted the analysis alongside Sylwia Bialek-Gregory, Ph.D., Merit Dressler, and Pia Hofmann-Willers.

Auction volumes align with targets, cost impact remains open

For onshore wind and ground-mounted PV installations, the expansion targets could generally be met through the planned auction volumes. However, risks arise from the redispatch reservation, which increases investment risk. Small rooftop PV systems continue to play an important role in meeting the expansion target for PV.

For EEG costs, opposing effects are expected. Skimming revenues from two-sided CfDs, the removal of feed-in tariffs for smaller solar systems, stronger direct marketing, and adjusted auction volumes could ease the federal budget. At the same time, redispatch reservation, grid connection charges, or reduced competition could drive up subsidy costs. The net impact cannot be clearly determined without quantitative modeling.