Germany's grid package: What the Federal Government's grid connection reform means for project developers and grid operators

Background

On 29 July 2026, the German Federal Cabinet approved the draft Grid Package (Netzpaket) — formally the Entwurf eines Gesetzes zur Änderung des Energiewirtschaftsrechts zur Synchronisierung des Anlagenzubaus mit dem Netzausbau sowie zur Verbesserung des Netzanschlussverfahrens. The legislative package is designed to better synchronise the expansion of renewable generation with the pace of grid development while introducing significant reforms to Germany's grid connection framework.

As electrification accelerates, renewable energy projects, battery storage, data centres, heat pumps and industrial consumers are all competing for increasingly scarce grid connection capacity. The existing legal framework provides grid operators with only limited tools to manage connection requests efficiently. The Grid Package seeks to address that imbalance through a series of reforms affecting grid access, connection procedures and network planning.

The draft will now proceed through the parliamentary process, and further amendments remain possible before it is enacted.

Redispatch in capacity-limited grid areas: compensation largely preserved, but conditions apply

One of the most closely watched aspects of the draft concerns redispatch compensation in so-called capacity-limited grid areas (kapazitätslimitierte Netzgebiete).

Earlier versions of the proposal would have required generators connecting in these areas to waive their entitlement to redispatch compensation entirely for as long as the relevant capacity limitation remained in place. That approach attracted significant industry criticism and raised questions as to its compatibility with Article 13(7) of the Electricity Market Regulation (EU) 2019/943, under which generators are generally entitled to financial compensation for redispatch unless they have voluntarily accepted a non-firm grid connection.

The Cabinet-approved draft adopts a more limited approach. The general entitlement to redispatch compensation is preserved. However, generators connecting in a capacity-limited grid area must agree, as part of their grid connection agreement, to waive compensation for redispatch affecting up to 20% of their annual electricity generation. The waiver is limited to the duration of the designation of the grid area as capacity-limited. For onshore wind projects located within acceleration areas designated under the Wind Energy Land Requirements Act (Windenergieflächenbedarfsgesetz), the threshold is reduced to 18%.

The waiver may be extended once, for a maximum of 18 months, unless the underlying grid constraints are resolved earlier or the delay results from the grid operator's failure to complete the necessary reinforcement measures. 

A capacity-limited grid area may be designated where redispatch measures under Section 13a EnWG reduced the active power output of directly or indirectly connected installations by more than 5% during the preceding calendar year. The designation applies separately to solar and wind installations and remains in force for six years. Grid operators must lift the designation where the relevant threshold is no longer exceeded on average over three consecutive years.

While the Cabinet draft clearly softens the approach taken in earlier versions, it remains open to question whether a mandatory partial waiver of redispatch compensation is fully consistent with the requirements of EU electricity market law. This is likely to remain one of the more closely debated aspects of the legislative process.

A new concept: system-supportive grid connection capacity

Another significant reform introduced by the draft is the concept of system-supportive grid connection capacity (systemdienliche Netzanschlusskapazität).

From 1 January 2027, the statutory entitlement to a grid connection will no longer be based on an installation's maximum generation capacity. Instead, the draft introduces permanent limits on the amount of electricity that certain new installations may feed into the grid.

For new ground-mounted solar projects, active power feed-in at the grid connection point will generally be capped at 70% of installed capacity. For new onshore wind projects, the cap will be determined by reference to the rotor-swept area, at 280 watts per square metre.

Unlike redispatch measures, these limits apply permanently, irrespective of whether the local grid is congested at any given time. The policy objective is to reduce peak feed-in, limit the need for costly grid reinforcement and encourage more system-friendly generation profiles.

In practice, the reform is also expected to strengthen the commercial case for co-located battery storage and other flexibility solutions. Rather than exporting all electricity as it is generated, developers will increasingly have an incentive to store surplus generation or optimise the timing of exports, allowing projects to operate within the applicable feed-in limits while maximising revenues.

Prioritisation of grid connections: moving beyond “first come, first served”

One of the most significant reforms introduced by the draft is the is the creation of an express statutory framework for the prioritisation of grid connection requests.

At transmission level, the four German transmission system operators (“TSOs”) have already moved away from the traditional “first come, first served” approach. Since 1 April 2026, they have applied a uniform maturity-based prioritisation process (Reifegradverfahren) under which projects are assessed by reference to criteria such as planning maturity, technical readiness, the applicant’s ability to deliver the project and its network and system benefits.

The proposed Section 17a Draft-EnWG would build on this development by establishing a statutory basis for prioritisation. TSOs would be required to develop transparent and uniform procedures for allocating scarce connection capacity, subject to approval by the Federal Network Agency (Bundesnetzagentur – “BNetzA”). The draft identifies a number of factors that may be taken into account, including security of supply, statutory expansion targets, approved scenario frameworks, the needs of adjacent or downstream networks, efficient use of grid connection points, spatial planning designations and the location dependency of the project.

 transmission system operators ("TSOs") will be required to establish transparent and uniform procedures for prioritising connection requests, subject to approval by the Federal Network Agency (Bundesnetzagentur – "BNetzA"). This would replace the current position, under which the four German TSOs voluntarily introduced a maturity-based prioritisation process (Reifegradverfahren) in April 2026.

The draft sets out a number of criteria that may be taken into account when determining priority. These include the contribution of a project to security of supply and statutory expansion targets, approved scenario frameworks, the efficient use of existing grid infrastructure, the needs of adjacent and downstream networks, spatial planning designations and – newly introduced in the Cabinet draft – the location dependency of the project.

For developers, the practical direction is therefore not entirely new: at transmission level, project maturity already matters under the Reifegradverfahren. The significance of the draft is that it would formalise and broaden that approach in legislation, while giving the BNetzA a stronger role in approving and shaping the applicable prioritisation procedures.

The reform also extends the prioritisation regime to distribution system operators ("DSOs") for the first time. DSOs may adopt the prioritisation principles approved by the BNetzA and may additionally take account of regional planning assumptions and the requirements of upstream networks when allocating connection capacity.

For grid operators, the new regime is also likely to increase regulatory scrutiny. Prioritisation decisions will need to be transparent, objective and consistently applied, with greater scope for regulatory oversight and potential legal challenge where those standards are not met.

Battery storage: Co-location receives further regulatory support

The draft also introduces an important clarification for energy storage projects, particularly battery storage co-located with renewable generation assets.

Under the proposed Section 17(2a) Draft-EnWG, storage installations will not benefit from the statutory grid connection priority that currently applies to renewable energy and combined heat and power installations under the EEG and KWKG. However, the more significant change is that grid operators may not refuse the grid connection of a co-located battery storage system on capacity grounds, provided that the agreed maximum import or export capacity at the relevant connection point is not increased.

This provision directly supports the co-location of battery storage with existing renewable generation assets — a model that is increasingly central to project economics, particularly in light of the parallel EEG Reform draft's permanent 50% export cap on new rooftop PV installations below 100 kW and the 70% power feed-in cap for ground-mounted PV installations – both of which strengthen the commercial case for paired battery storage.

Flexible connection agreements

The draft also formalises and expands the use of flexible connection agreements (“FCAs”), reflecting the growing recognition that firm grid connections will not always be feasible in a capacity-constrained electricity system.

Under the proposed Section 17a(2) Draft-EnWG, TSOs may make a grid connection conditional upon the conclusion of an FCA where demonstrable grid constraints exist. Under such an agreement, the grid operator may limit the amount of electricity that can be injected into or withdrawn from the grid, subject to the approval of the BNetzA. An exception applies where the connecting party agrees to bear the costs of the necessary grid reinforcement itself.

The draft also extends the BNetzA's regulatory powers under Section 8a Draft-EEG, enabling it to establish more standardised rules for FCAs. While this should improve transparency and consistency, the commercial terms of individual agreements are still likely to vary depending on the characteristics of the relevant project and the local network conditions.

Reservation and release of grid connection capacity

The draft also introduces, for the first time, a statutory framework governing the reservation and release of grid connection capacity – an area that has until now been largely unregulated despite its practical importance for project development.

Under the proposed Section 17f Draft-EnWG, DSOs will be required to establish transparent rules for reserving and releasing grid connection capacity for installations with a rated capacity of 135 kW or above. Capacity reservations will be time-limited, linked to project progress and may be subject to a reservation fee. As with the new prioritisation regime, the applicable rules will require approval by the BNetzA.

The draft also addresses the growing problem of unused or over-reserved connection capacity. Where reserved capacity has not been used, or has consistently been used below the agreed level for more than five years, grid operators may reduce the reserved capacity where it is reasonable to conclude that it will not be required on a permanent basis.

Transparency, Digitalisation, and Procedural Deadlines

The draft also introduces a number of procedural reforms aimed at improving the transparency and efficiency of the grid connection process.

Grid operators will be required to publish regularly updated network maps showing available grid connection capacity. These maps must be updated monthly, giving developers greater visibility of available capacity when identifying and assessing potential project sites.

The draft also accelerates the digitalisation of the grid connection process. From 2028, DSOs must provide a fully digital process for non-binding grid connection enquiries for installations with a capacity of 135 kW or above. As a further improvement introduced in the Cabinet draft, operators must also provide a non-binding estimate of the expected grid connection costs, giving developers an earlier indication of likely connection expenditure.

The proposal also shortens procedural timelines. Following receipt of a formal grid connection request, grid operators must provide an initial status update within two months and continue to keep applicants informed where a final response cannot yet be provided. Additional information on the connection process must also be made publicly available on each grid operator's website.

New cost exposure: Construction cost contributions for generation installations

The revised Section 17 Draft-EEG introduces, for the first time, a construction cost contribution chargeable to generating installations connecting to the grid. This represents a structural change in the allocation of grid expansion costs: under the current framework, those costs are borne by the grid operator and recovered through general network tariffs. Under the new model, a portion of those costs may be passed through directly to the connecting party.

The BNetzA is to be empowered to determine the applicable procedures and criteria — whether as flat-rate amounts or as regionally differentiated figures based on grid-economic parameters. The express legislative rationale is that regional differentiation will create location incentives, making connections in grid-stressed areas more expensive and steering new capacity towards sites where the grid can accommodate it more readily.

The construction cost contribution cannot be levied until the BNetzA has issued its regulatory determination. That determination has not yet been made, and the precise amounts remain unknown. For project developers and investors, this creates a near-term cost uncertainty for new connections that cannot yet be quantified from the face of the legislation alone, and that will require monitoring as the BNetzA's process progresses.

Outlook: What this means for project development and financing

The Grid Package and the parallel EEG Reform together represent one of the most significant changes to Germany's renewable energy framework in recent years. While both proposals remain subject to the legislative process, the direction of travel is clear: future grid connections will become more conditional, more actively managed and more closely aligned with overall system needs.

For developers and investors, the commercial implications are likely to be significant. Site selection, connection strategy and project timelines will require closer scrutiny than under the current framework. New projects should be assessed against the proposed prioritisation regime, the potential construction cost levy and the increasing use of FCAs. 

Several important elements – including the construction cost levy methodology and aspects of the new connection regime – will depend on future BNetzA determinations. Businesses with projects in the pipeline should therefore continue to monitor both the legislative process and the associated regulatory implementation.