Reform Faced with Numerous Obstacles, Part 2: How Politicians Are Hindering the Expansion of Energy Storage

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Under the EEG, operators of solar installations and wind turbines receive a fixed feed-in tariff for every kilowatt-hour (kWh) of electricity fed into the grid over a period of 20 years. This payment is made regardless of whether there is a surplus of electricity. To prevent the electricity grid from becoming overloaded, flexible electricity generators such as wind turbines or PV systems are taken offline when there is a surplus, but still receive this payment.

These are the so-called redispatch measures, which incur costs running into millions of euros annually, as consumers and industry are unable to absorb the surplus electricity, the necessary storage capacity is still lacking, and the electricity must at times be sold at negative prices.

These compensation costs (which in 2025 will amount to a manageable 430 million euros) could be significantly reduced in the foreseeable future if points a) to c) mentioned in the previous article were incorporated into the energy and economic strategy.

Deliberate standstill in grid expansion

Instead, Minister for Economic Affairs Katharina Reiche is linking the EEG to the ‘grid package’. The ‘grid package’ provides for regional distribution system operators to classify parts of their infrastructure, such as substations and associated sections of power lines, as ‘capacity-limited’ if redispatching measures, i.e. curtailments of PV systems and wind turbines, exceeded 5 per cent of annual electricity generation in the previous year.

Distribution system operators can therefore designate an area as a grid congestion zone if five per cent of electricity generation was curtailed in the previous year, and are then not legally required to pay the curtailed electricity generator compensation for their lost EEG feed-in tariffs.

The priority given to the connection of renewable energy (RE) sources at substation grid connections will also cease to apply to distribution system operators; in other words, distribution system operators will no longer be required to give priority to providing grid connections for RE and storage facilities.

Distribution system operators could therefore continue to take their time, withhold funding and decide which distribution networks and substations are to be upgraded with new grid connections, and who receives the desired (and often urgently needed) connection.

Project developers will then avoid building and connecting new installations in areas with grid bottlenecks and will plan new installations only in line with existing grid capacity: in places where the grid can still accommodate green electricity. With these reservations and restrictions, future renewable energy projects – such as PV systems, new wind turbines, the replacement of existing wind turbines or additional storage facilities – will no longer be financially viable, will become uneconomical and unprofitable, and will not be built.

Excerpt from the journal *Renewable Energies*: “At stake are more than 436,000 jobs in an industry dominated by small and medium-sized enterprises, as well as investments of well over 30 billion euros.”

“Germany must not fall back into new dependencies on fossil fuels simply because the necessary framework conditions for the energy transition are lacking,” said the president of the Federal Association for Renewable Energy. To provide a better overview, the Federal Network Agency (BNetzA) published a map in July 2026 showing the supply quality of distribution system operators.

Expanding storage capacity would reduce redispatching costs

At present, there is an unprecedented number of applications for storage facilities in the energy sector, as batteries for storage are relatively inexpensive on the world market. According to information provided by the head of Green Flexibility, Mr Ostermann, in the LVZ on 23 July 2026: “If all the large-scale storage projects currently under application, with a capacity of one megawatt-hour (MWh) or more, were to be implemented, the total available capacity would be around ten times the maximum peak load on the local electricity grid.”

This means that if the expansion of storage capacity were to be supported by the Ministry to the extent proposed, the surplus electricity could be absorbed several times over and fed back into the grid at times of demand. This would mean there would no longer be any redispatching costs and no electricity would have to be ‘wasted’, as Katharina Reiche remarked some time ago.

“The German economy could save just under four billion euros a year with additional battery storage facilities having a capacity of 80,000 MWh,” concludes a recent study by the Fraunhofer Institute for Energy Economics and Energy System Technology.

However, for further renewable energy storage facilities (and generation plants), far more decentralised grid connections at substations are required. These are provided by the distribution system operators, who – under the new ‘grid package’ – are, however, exempt from giving priority to renewable energy. So once again, we’ve ended up in a vicious circle; or to put it another way, the Ministry is quite actively hindering the expansion of renewables.

But to what end?

The politically desired expansion of fossil fuel-fired gas reserve power stations

According to the Federal Ministry for Economic Affairs, tenders for the construction of new gas-fired power stations with a total capacity of 11 gigawatts (GW) are due to begin in 2026. These reserve power stations are then to be connected to the grid by the end of 2031 at the latest, in order to compensate for temporary shortfalls in electricity generation, particularly in winter. To achieve this, however, they must be maintained, kept operational and ultimately subsidised throughout the year. These costs, running into the billions, are borne by the general public – that is, the taxpayer.

The new plants are initially to be fuelled by natural gas, which is associated with the emission of harmful greenhouse gases. After 2045, these gas-fired power stations are then to be operated ‘climate-neutrally’ using hydrogen. However, this will only work if a) hydrogen production were massively expanded – something for which there is currently no sign whatsoever in terms of funding programmes or regulatory support – and b) if sufficient ‘green’ hydrogen (H) were produced.

To achieve this, however: – a massive expansion of electrolysers would be required; – the expansion of wind farms would need to be scaled up (as 7 to 9 parts of electricity are needed to produce 1 part of H); and – sufficient pure water must be available. Furthermore: if electricity is already being generated from renewable sources, it is more effective to store this electricity temporarily than to convert it into hydrogen, which involves immense losses.

The only acceptable solution is that controllable electricity generation capacity is required for periods of low electricity output. Gas-fired power stations are suitable for this, as they can be ramped up or down quickly. The contentious issue here is the scale at which these gas-fired power stations are required.

The nationwide distribution of gas-fired power stations is also still a matter of debate, as according to Katharina Reiche’s original plans, two-thirds of gas-fired power station capacity was to go to bidders in North Rhine-Westphalia, Baden-Württemberg and Bavaria – the so-called ‘grid south’ – rather than expanding renewable energy and electricity storage there. The reasoning was that there are many large industrial plants in the south.

Politicians, trade unions and businesses in the east – in Saxony and Brandenburg – protested against this preferential treatment. The legislation now provides for:

– a two-part tender process for the GKW,

– the most favourable bids will be awarded the contract,

– if applicants from northern and eastern Germany have secured a total of one-third of the GKW sites, the bonus for the south is to apply. However, there is no guarantee that projects in eastern Germany will be awarded the contract. It is unclear how this is supposed to work.

LEAG is interested in two sites: one in Lusatia and one in Lippendorf near Leipzig.

Possible timetable:

– the projects should already have partial approvals under the Federal Immission Control Act,

– following the award of the contract, at least one year of planning will be required before a building permit is granted,

– the construction period alone will take around 4 to 5 years, meaning the GKW could be commissioned by the mid-2030s, i.e. between 2033 and 2035.

If the Federal Government were to massively expand renewable energy during this period and specifically put in place the technical and technological prerequisites and legal regulations (see points a) to c) above), it is highly likely that this expansion would not be required on such a scale, nor would gas supplies be necessary, meaning that immense financial resources running into billions of euros could be channelled elsewhere.

According to the President of the German Renewable Energy Federation, Heinen-Esser, renewable energy is having an increasingly stabilising influence: “With a significantly higher share of renewable energy in the electricity system, price fluctuations on the electricity market are noticeably lower than during the fossil fuel energy crisis of 2022. Every kilowatt-hour of renewable electricity that replaces fossil-fuel generation has a stabilising effect on prices. Conversely, every additional gas-fired power station that has to be brought online makes the electricity system more expensive.”