€18 Billion Government Funding for Renewable Energy in Germany 2025
21 October 2024 by Nuwan Goonewardena
5 min read
The funding costs for renewable energy in Germany are expected to surpass previous forecasts for this year, largely due to extended periods of negative spot market prices on the electricity exchange. According to a recent report, this trend of elevated costs is projected to continue until 2029.
Government costs for renewable energy sources in 2025 could be lower than those of the current year, according to the EWI medium-term forecast.
Source: EWI
The Energy Economics Institute (EWI) at the University of Cologne has released a medium-term forecast for Germany's Renewable Energy Sources Act (EEG). The report predicts that funding for renewable energy will exceed €18 billion ($19.48 billion) in 2025, marking an increase of nearly €1 billion from 2023.
Despite this anticipated rise, the EWI's forecast suggests that government expenditures on renewable energy could be lower in 2025 compared to the current year. By September 2024, nearly €15 billion had been allocated from the federal budget to balance the EEG account, as recorded by netztransparenz.de, the transmission system operators' official website. These costs were significantly underestimated a year ago, with the actual financing needs likely to approach €20 billion, according to the EWI's projections.
The EWI's medium-term outlook extends to 2029, expecting renewable energy generation capacity in Germany to double to over 300 GW, compared to 2023. This expansion, under normal weather conditions, would generate approximately 380 TWh. Subsidy payments under the EEG are anticipated to reach nearly €23 billion by the end of the forecast period, despite 22 GW of solar and wind energy installations becoming ineligible for high remuneration rates by 2029.
The EWI expects the output of open-space PV systems to triple by 2029 compared to 2023.
Source: EWI
The institute predicts that the output of ground-mounted photovoltaic (PV) systems will triple by 2029, relative to 2023. In a high-probability scenario, the EWI foresees significant growth in installed capacity, particularly in open-space solar systems, whose capacity could more than triple by the end of 2029 from 2023 levels. This growth is driven by declining technology costs and an improved regulatory framework, including higher funding rates, larger tender volumes, and reduced bureaucracy. The EWI envisions an installed PV capacity of around 200 GW by 2029, with nearly 124 GW coming from open-space systems.
However, the increase in EEG funding costs is not solely due to new installations. A drop in expected market values is another critical factor, as highlighted by the EWI. As market values decline, the gap between market prices and subsidy levels widens, leading to higher overall costs for EEG payments. The market values of solar systems, in particular, are predicted to fall due to the high simultaneity of their production, causing subsidy payments to rise disproportionately in relation to the expected capacity expansion.
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