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Germany’s renewable energy market is getting busy – nearly 60% of electricity consumption was already covered by renewables in early 2024, and the 80% target for 2030 now appears increasingly achievable. Adding to potential for this market is the country’s plan to phase out coal power. The Coal Phase-out Act targets complete elimination by 2038, though the government hopes to accelerate this to 2030. The plan establishes gradual reductions, with both hard coal and lignite plants decreasing to 8-9 gigawatts each by 2030. Regular reviews in 2026, 2029, and 2032 will evaluate energy security and price impacts, potentially enabling even earlier shutdowns.
To reach their 80% target for 2030, Germany plans massive capacity expansions across key renewable technologies. The country aims to nearly triple its solar capacity to 215 GW and increase wind capacity to 145 GW by 2030. Solar capacity recently surpassed 100 GW, with around 17 GW of newly installed photovoltaic systems on rooftops and open spaces added in 2024 alone. The country is aiming for 215 GW by 2030 and 400 GW by 2040. Meanwhile, without a capacity target set, battery storage is poised for five-fold growth by 2026.
What’s driving the surge in BESS opportunities?
Battery storage is a growing market in Germany, with price volatility the usual driver. Around 7 GWh of new storage will be added to the existing 1.8 GWh large-scale capacity. And the entire storage sector is flourishing beyond just utility-scale projects. By mid-2024, Germany had installed almost 16 GWh of total storage capacity across all segments. This includes 1.51 million home storage systems (13 GWh), 1.1 GWh of commercial battery capacity, and 1.8 GWh of large-scale storage – the largest residential storage market in Europe. You can find continuously updated figures here.
Although February 2025 saw lows in BESS revenues in Germany, with only €5,000/MW/month, the overall trend remains positive, driven by increasing renewable integration and market volatility. This year, all four German Transmission System Operators (TSOs) — 50Hertz Transmission GmbH, Amprion GmbH, TransnetBW GmbH, and TenneT TSO GmbH — need to include a new product, reactive power. 50Hertz Transmission started recently, implementing a market-based procurement of reactive power ahead of the Federal Network Agency’s deadline. This new reactive power market aims to reduce costs through increased transparency and competition while developing alternative sources beyond conventional fossil fuel plants, including renewable energy systems, electrolysers, and large battery storage systems.
Opportunities span multiple revenue streams, including frequency containment reserve (FCR), automatic frequency restoration reserve (aFRR), and spot market arbitrage. FCR is the fastest response to grid frequency deviations, activated within 30 seconds to counteract supply and demand imbalances. aFRR provides a more sustained solution, restoring grid frequency over a slightly longer period. Spot market arbitrage involves buying electricity at low prices and selling it when prices are high, capitalising on wholesale market fluctuations.
Co-location with renewables creates strong economics. The September 2024 innovation tender awarded 587 MW of solar-plus-storage at €0.0709/kWh – these hybrid installations optimise land use, share grid infrastructure, and enable load shifting. Beyond these primary revenue streams, BESS operators can tap into Germany’s daily auctions for 570 MW of FCR capacity, offered in 4-hour blocks.
How will the planned capacity market work?
German authorities are discussing how to strengthen its electricity market with a capacity mechanism by 2028, which would reward power producers just for being available. The new government, following February’s elections, is leaning toward an integrated capacity market that combines the centralised auctions for guaranteed capacity with incentives for small, flexible assets. For battery storage operators, this creates a potential new revenue stream beyond the usual arbitrage and grid services.
The debate isn’t settled yet. Power market players are still arguing over the details – how centralised should it be? Which technologies qualify? How much will it cost consumers? But they do agree that paying for standby capacity is cheaper than blackouts when the wind doesn’t blow and the sun doesn’t shine.
How does Germany’s auction and tender system work?
Germany’s renewable energy market operates through auctions managed by the energy system regulator, Bundesnetzagentur (Federal Network Agency or BNetzA). This system has evolved significantly since 2017, when Germany shifted from feed-in tariffs to competitive auctions for most renewable projects.
TSO booster projects
German Transmission System Operators (TSOs) manage Grid Booster projects through structured tendering processes designed to integrate battery storage into the grid as virtual power lines. These Storage-as-Transmission-Assets projects begin with TSOs like Amprion or TransnetBW launching competitive tenders for private partners to build and operate large-scale battery systems at strategic grid congestion points. For example, Amprion’s 2024 tender sought five decentralized 50 MW systems, while TransnetBW partnered with Fluence to deploy a 250 MW/250 MWh battery in Kupferzell.
Battery operators earn hybrid compensation: fixed availability payments and market-based revenues from arbitrage or frequency regulation services like aFRR. The next bid is Amprion’s (registration by April 3, 2025 for operation 2026), with contracts expected to be awarded in summer 2025. Others have not yet been announced.
Standard auctions
For standard technology-specific auctions, BNetzA publishes submission dates online. Developers submit bids specifying their desired market premium and installation volume. The agency selects winners based on the lowest bids, with price ceilings set annually to ensure economic viability. For 2025, these ceilings are 7.35 cents/kWh for onshore wind (unchanged from 2024), 6.80 cents/kWh for ground-mounted solar (down from 7.37 cents/kWh), and 10.40 cents/kWh for rooftop installations (down from 10.50 cents/kWh). To ensure stable revenue, successful bidders receive a ‘market premium’ (the difference between their bid price and the market price) for each kilowatt-hour they produce over a 20-year period.
Innovation tenders
Beyond standard auctions, Germany has introduced innovation tenders overseen by the Bundesnetzagentur, specifically for hybrid projects. These are specialised auctions for projects that combine variable renewable sources (like solar and wind) with non-variable sources or energy storage. The goal is innovative solutions for grid stability and flexibility. Recently adjusted regulations for innovation tenders aim to make them more attractive to developers. These include increasing the maximum feed-in tariff for hybrid PV-battery systems by 25% to €0.0918/kWh, addressing previous challenges of low participation rates and insufficient economic benefits for co-located solar and storage projects.
Innovation tenders are heavily subscribed and have been particularly successful for solar-plus-storage. The next Innovation Tender is scheduled for 1 May 2025. Overseen by the Bundesnetzagentur, they’re for bids that integrate renewable energy and storage.
Contracts for Difference
Germany is moving toward two-sided Contracts for Difference (CfD) in line with EU requirements. By 2027, all new state-backed support mechanisms to promote wind, solar, geothermal, hydro and nuclear power must include repayment clauses to avoid over-funding. The German economy ministry proposed several CfD options in September 2024, where installations would receive support when wholesale prices are low and return profits when prices are high. Recent amendments to the Renewable Energy Act (EEG 2023) have further streamlined the market. The law now designates renewables as being in the ‘overriding public interest,’ simplifies PV system expansion, and provides incentives for household energy projects. The latest amendments also adjust remuneration during negative price periods and reform marketing for smaller plants.
Germany’s auction systems, innovation tenders, and upcoming shift to CfD are revamping how projects secure revenue. This makes Germany a promising renewable energy market – combining scale, supportive policy, and growing demand for solutions that balance the increasingly renewables-powered grid.
