Germany is undergoing an energy transformation that requires a more modern, digitalised, and efficient power grid. The increase in renewable generation, particularly wind and solar, has significantly altered the country’s electricity supply structure, necessitating the expansion and optimisation of transmission and distribution infrastructure.

“Grid modernisation and expansion are key issues,” states Fiete Wulff, Head of Press and Public Relations at Bundesnetzagentur, in a conversation with Strategic Energy Europe. “Germany’s energy structure is changing: generation is concentrated in the north, whereas industry remains in the west and south. This requires a significant expansion of the transmission network.”

The Need for a More Robust and Digitalised Grid

For years, Germany has been discussing the urgent need to modernise its grid to accommodate the energy transition. However, planning procedures have traditionally been slow. The government has introduced measures to accelerate these processes, allowing infrastructure development to keep pace with the growing demand for renewables.

“Planning procedures have improved, and transmission grid expansion is progressing well,” Wulff confirms. “However, at the distribution level, much remains to be done, particularly in terms of digitalisation.” Germany has approximately 800 distribution system operators (DSOs), making it challenging to implement advanced grid management technologies.

According to the regulator, digitalisation is a weak point in the system and a key factor in enhancing grid efficiency and flexibility. “We are still lagging behind in digitalisation, and this is an area where rapid progress is needed,” Wulff warns.

Impact of the Suspension of Solar Energy Incentives

One of the most debated topics in the sector is the suspension of incentives for solar generation during negative price periods. On sunny days with low consumption, excess electricity supply drives wholesale market prices down. To address this, the regulator has opted to suspend incentives in certain situations to improve market stability.

“The growth of renewable energy is a success, but it must now take responsibility within the electricity system,” Wulff explains. “It is no longer a niche sector but a fundamental part of the energy mix, and it must respond to market conditions.”

Despite this measure, Bundesnetzagentur does not expect it to affect the profitability of solar projects; instead, it aims for a more balanced development of renewable generation.

The Challenge of Energy Storage and Price Volatility

Large-scale energy storage development is another crucial factor in modernising the system. However, the regulator believes it must be a competitive and self-sustaining market. “Storage development is market-driven, and we are currently seeing a boom in this sector,” Wulff says. “Every part of the renewable system must be competitive and market-oriented.”

Regarding price volatility, events such as Dunkelflaute (extended periods of low renewable generation due to adverse weather conditions) have caused electricity price spikes. However, Wulff clarifies that this has not compromised Germany’s power supply security.

“These price peaks reflect the natural interaction between supply and demand,” he explains. “Germany has sufficient generation capacity and energy reserves.” In 2022, the country recorded more than 2,000 hours with prices exceeding €300 per MWh due to the gas crisis. In contrast, in 2023, only 40 hours fell within this price range, indicating a stabilisation of the market.

The Future of Germany’s Power System: Digitalisation, Backup Capacity, and Stability

Looking ahead, Germany must strengthen its backup capacity with new controllable generation plants. “We need new gas-fired generation capacity to complement the variability of renewables,” Wulff asserts. The previous government proposed the Kraftwerksicherheitsgesetz, a regulatory framework to encourage the development of backup power plants that can operate when renewable generation is insufficient.

Furthermore, the regulator stresses the importance of maintaining the pace of grid expansion and accelerating the digitalisation of distribution operators. “These are the challenges that need to be addressed in the coming years,” Wulff concludes.

With an energy sector increasingly focused on sustainability, Germany is advancing in modernising its grid to consolidate its energy transition. While regulatory and technical challenges persist, the country remains at the forefront of developing a more efficient and renewable-based electricity system.