Germany Has Introduced A 50MW PV Project Subsidy Eligibility Threshold

 

 

Germany has introduced a 50MW PV project subsidy eligibility threshold, and its capacity mechanism includes 10GW of dispatchable assets to ensure supply security.

 

The German government needs to maintain policy flexibility to address the uncertainty of end-user electricity demand and ensure the cost of the energy transition remains manageable. Policymakers should prioritize three "no-regrets" measures: First, continue to expand renewable energy capacity regardless of demand fluctuations. Taking photovoltaics (PV) as an example, even with cautious demand forecasts, Germany will need to continue building capacity to achieve its decarbonization target by the mid-2030s. The new government must accelerate the reform of the Renewable Energy Sources Act (EEG) and introduce a two-way Contract for Difference (CfD) mechanism. Current delays in reform have hindered the European Commission's approval of the "Solar Package," which would open up subsidies for large-scale ground-mounted PV projects up to 50MW.

 

Second, there is an urgent need to increase investment in flexibility resources. Rapid expansion of demand-side flexibility and energy storage systems can create a "win-win" situation in the energy market: by matching the intermittent nature of renewable energy generation, it can reduce power outages and lower energy costs for consumers, while also increasing market value and reducing subsidy dependence. This measure has universal applicability for improving the cost-effectiveness of the energy transition and should be a priority for the ruling coalition.

 

Third, flexibility and dispatchable capacity must work together to ensure power supply security. Regarding the government's plan to add 20 GW of gas-fired power, analysis shows that, under a scenario of limited short-term demand growth, only 10 GW of additional capacity is needed to completely eliminate the capacity gap, while 5 GW could reduce the gap to 2 GW. However, over-implementing the Power Plant Strategy could lock in inefficient thermal power assets and increase system costs. The government should quickly clarify the design framework for a technology-neutral capacity mechanism that not only incentivizes dispatchable thermal power but also creates a fair space for flexible technologies such as battery storage and demand-side response.