The EWI short report examines whether construction cost subsidies (Baukostenzuschüsse, BKZ) for renewable electricity generators can steer the regional expansion of renewable energy and thereby reduce grid expansion, redispatch and overall system costs. The starting point is the lack of temporal and spatial congruence between grid and renewable expansion, which drives up redispatch volumes and costs. Using the supply curves of the German renewable energy (EEG) auctions, the report shows that a generator-side BKZ of 100 €/kW raises the levelised cost of electricity (LCOE) of sites requiring grid expansion and can thus shift auction awards towards grid-friendly locations. The instrument’s effectiveness benefits from the reference-yield model (onshore wind) as well as from the cost structure and the low regional variation in full-load hours (ground-mounted PV). Open questions on the detailed design remain; a calculable BKZ level and sufficient competition in the EEG auctions are key prerequisites, while a dynamic, more regionally differentiated design could further increase its effectiveness.