Policy and investment in German renewable energy

The report finds that Germany has sufficient capital to meet its renewable energy targets, with an annual investment potential of €25-€35 billion, which is 60-170% more than required. However, achieving these goals cost-effectively requires a diverse mix of investors, including utilities, developers, financial institutions, and end users. The analysis highlights that while short-term finance and long-term debt are plentiful, long-term equity is spread unevenly across technologies. Key policy risks identified include the complexity of incentive auctions, which may exclude small investors, and the threat of economic curtailment due to negative electricity prices, which could increase onshore wind bid prices by 17% by 2020. The report argues that a coherent energy market design is the most critical long-term factor for maintaining investment and reducing costs.

• Germany possesses more than sufficient capital to meet its renewable energy targets, with an annual investment potential of €25-€35 billion, representing 60-170% of the capital required to finance the targeted deployment of approximately 7.4GW of new solar PV, onshore wind, and offshore wind capacity per year through 2020.
• The availability of investment is uneven across technologies: solar PV and offshore wind have more than double the required investment available, while onshore wind has a smaller cushion due to greater market maturity and lower returns.
• Incentive auctions may discourage small investors and end users due to high transaction costs and complexity, potentially limiting the pool of competitive investors and increasing long-term energy costs.
• Economic curtailment—the suspension of subsidies during negative electricity prices—poses a significant risk; without flexibility measures, it could increase onshore wind bid prices by 17% by 2020.
• The duration of revenue support significantly impacts costs; shortening support from 20 years to 15 years could increase energy costs by 15-18% depending on the technology.
• Linking revenue support to inflation could attract institutional investors and reduce real energy costs by 18-20%.
• A 12-month delay in offshore wind development can increase bid prices by 21% or more if these expectations are reflected in bids.
• Halving offshore wind targets could increase the cost of energy by 6% by 2020 due to limited learning opportunities.
• Business process improvements have driven significant cost reductions; from 2006-2014, non-module costs for PV systems fell by 11.5% annually for large-scale projects and 7.7% annually for rooftop solar.
• Current energy market design is inadequate for a renewable-dominated system and could result in zero or negative electricity prices for more than 1,000 hours per year by 2030.
• A 2% increase in interest rates, coupled with a 2% increase in equity return requirements, would increase the weighted average cost of renewables by 12.8%.
• End users provided over 25% of equity investment in 2015 and are projected to provide half of the potential equity investment in 2020, making them critical for meeting deployment targets.

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.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.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.pdf |access-date=23 October 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.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }