Policy and investment in German renewable energy

This report by the Climate Policy Initiative (CPI) analyzes the relationship between policy frameworks and investment in Germany's renewable energy sector. It evaluates the availability of capital, the cost-effectiveness of different investor mixes, and the impact of specific policy mechanisms—such as incentive auctions and curtailment rules—on the deployment of solar PV, onshore wind, and offshore wind capacity.

• There is more than sufficient capital available to meet Germany's renewable energy targets, provided the right policy framework is in place. Annual investment potential is estimated at €25 - €35 billion, which is 161%-269% of the amount required to finance the government's target of approximately 7.4GW of new solar PV, onshore wind, and offshore wind capacity per year through 2020.
• The cost of renewable energy varies significantly based on the type of investor. To achieve the lowest overall cost, Germany needs a diverse mix of investors. For example, end users provided over 25% of equity investment in 2015 and are projected to provide up to half of the potential equity investment by 2020.
• Current energy market designs could lead to zero or negative electricity prices for more than 1,000 hours per year by 2030 if system flexibility is not improved. Economic curtailment (shutting off production during negative prices) imposes high costs on investors due to revenue risk; by 2020, if curtailment levels approach 500 hours by 2025, investors would require prices over 30% higher to meet financial objectives compared to a fixed-price scenario.
• Different policy options for managing negative prices have varying cost impacts. A 'take-or-pay' arrangement (paying generators for lost output during curtailment) is the lowest cost and risk option. 'Proportional curtailment' reduces the cost of curtailment to 5%, while 'curtailment after six hours' reduces the cost from over 30% to under 20%.
• Incentive auctions are intended to reduce costs through competition, but they risk excluding smaller investors due to high transaction costs and complexity. While large utilities and developers are comfortable with auctions, smaller players fear that the complexity and costs of bidding will limit the pool of competitive investors, potentially leading to higher prices in the long term.
• Specific policy adjustments can significantly impact energy costs and investment attractiveness. Shortening revenue support from 20 years to 15 years could increase energy costs by 15-18%, whereas linking revenue support to inflation could decrease energy costs by 18-20% in real terms. Additionally, a 12-month delay in offshore development caused by gaps between auction rounds could increase bid prices by 21% or more.
• Reliable long-term targets are critical for reducing costs through business process improvements. For instance, between 2006 and 2014, non-module costs for PV systems fell by 11.5% per annum for large-scale projects and 7.7% per annum for rooftop solar. Conversely, halving offshore wind targets could increase the cost of energy by 6% by 2020 due to limited learning.

APA

Nelson, D., Huxham, M., Muench, S., & O’Connell, B. (2016). Policy and investment in German renewable energy. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2016/04/Policy-and-investment-in-German-renewable-energy-Summary.pdf

Chicago

Nelson, David, Matthew Huxham, Stefan Muench, and Brian O’Connell. Policy and investment in German renewable energy. Climate Policy Initiative, 2016. https://www.climatepolicyinitiative.org/wp-content/uploads/2016/04/Policy-and-investment-in-German-renewable-energy-Summary.pdf.

Wikipedia

{{cite report |last1=Nelson |first1=David |last2=Huxham |first2=Matthew |last3=Muench |first3=Stefan |last4=O’Connell |first4=Brian |title=Policy and investment in German renewable energy |publisher=Climate Policy Initiative |date=April 2016 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2016/04/Policy-and-investment-in-German-renewable-energy-Summary.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{nelson2016policy, author = {Nelson, David and Huxham, Matthew and Muench, Stefan and O’Connell, Brian}, title = {{Policy and investment in German renewable energy}}, institution = {Climate Policy Initiative}, year = {2016}, month = apr, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2016/04/Policy-and-investment-in-German-renewable-energy-Summary.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }