German businesses have urged the government to boost the uptake of Power Purchase Agreements (PPAs) and strengthen the role of Guarantees of Origin (GOs) in the country’s decarbonisation efforts.
Recommendations include the introduction of government guarantees for PPA offtakers and relaxation of the double marketing ban on GOs under certain condition, according to a report published by German energy agency dana.
Dena and the German Chamber of Commerce and Industry (DIHK) have set up the Renewable Energy Market Initiative – an association of around 50 companies, covering the entire value chain. The goal is to further develop Germany’s renewable energy market, thus contributing to achieving the country’s energy transition targets.
The report argues that up to 25 % of electricity demand in Germany could be covered by PPAs in 2030 if the government takes on board all nine recommendations put forward in the report. This would represent 178 TWh based on forecasted 712 TWh demand in 2030, according to Veyt basecase.
To compare, German consumption stood at 502 TWh in 2024 with around 2 TWh contracted under PPAs, according to Veyt’s PPA transaction database. Note: Not all PPA announcements have information on annual production volumes or contract start date.
Germany is required to change its renewable support scheme from 1 January 2027 to comply with European Market Reform guidelines. The new scheme will be part of the future electricity market design where both government support as well as market-based mechanisms such as PPAs should go hand in hand to reach the country’s ambitious renewable targets.
Dena’s report argues that the government needs to strive for “as much market-driven [renewables] expansion as possible and as much government support as necessary.”
Therefore, the new market design should strengthen renewable projects’ refinancing via the market. The unsubsidised renewables expansion can also be strengthened through regulatory requirements such as size limits in tenders or consideration of different site conditions.
Most small and medium-sized companies struggle to access the PPA market as they often lack the credit rating required for bank assessments. A government guarantee that covers the off-taker’s default risk can reduce capital costs in PPA project financing and electricity prices, as well as facilitate access for more companies to the PPA market. This could include not only industrial and commercial companies, but also energy suppliers with increasing investment commitments.
The new coalition agreement provides for a flat-rate reduction in electricity tax and grid fees for all consumer groups. To encourage the industry and commerce to sign physical PPAs, the government should introduce further reductions in electricity tax and grid fees.
However, this would require an amendment to the European Taxation Directive, which has been stuck in the EU legislative process since 2021.
The proposed introduction of an Industrial Electricity Price should be structured as tax incentives modeled on the US Inflation Reduction Act (IRA). Compared to operating cost subsidies, from the EU’s perspective, investment subsidies do not require a clawback mechanism and can be granted without state aid up to a subsidy level of 15 %.
Furthermore, PPAs in Germany are already a suitable access criterion for state aid for indirect emission costs, also known as electricity price compensation (SPK), and should be included in future incentive instruments.
Uncertainties regarding the classification of different PPA types in mandatory financial reporting under the International Financial Reporting Standards (IFRS), limit PPA uptake.
Currently, physical PPAs are subject to an “own use exemption” and are therefore not considered derivatives. At the same time, many PPAs require supplementary trading on the electricity market due to the structuring requirements. Therefore, in many cases, it is no longer clear when the existing exemption will apply.
A long-term PPA must not lead to buyers becoming plant operators from a balance sheet perspective, with the associated financial risk positions. The German government should advocate at the European level for clear exemptions for both physical and virtual PPAs.
The current interpretation of the terms “customer facility” under the Energy Industry Act (EnWG)Â as well as the requirement for “immediate spatial proximity” in the Renewable Energy Sources Act (EEG) are causing confusion. Both terms need to be clarified or removed to boost project implementation. The set length of 5 km for direct lines connecting the production and consumption sites should also be removed.
Demand-driven pooling models should be strengthened so that companies with multiple locations or several companies together can purchase electricity through an onsite or offsite PPA without having to pay multiple grid fees.
Issues related to balancing group management under multi-buyer PPAs should also be cleared up to minimise transaction costs. There is currently no clear framework for consumer pooling. The last amendment to the EnWG in early 2025 was intended to create an initial basis for shared energy supply, but this topic was not included in the adopted amendment.
Municipalities should be required by law to use green electricity either by building their own facilities or via offsite PPAs.
The report proposes several measures designed to strengthen the transparency and uptake of GOs (including coupled delivery of electricity and GOs), as well as keeping the value of local GOs above the wider AIB market.
The measures include:
Introducing granular GOs (both time and location-specific) to track green electricity production and consumption in real time;
Linking the use of GOs more closely to government subsidies and tax relief schemes (e.g. state aid, Industrial Electricity Price);
Issuing GOs to self-consumed renewable energy;
Relaxing the double marketing ban: New renewable plants supported through government subsidies should, in the future and under certain conditions, also receive GOs. These GOs could be sold by the government via auctions to smaller consumers who do not have access to the PPA market.
All nine recommendations would be in line with the Electricity Market Reform which encourages member states to facilitate PPA deployment, alongside the use of CfDs to accelerate renewables expansion. Therefore, the German PPA market should see a boost, even if the government takes on board only some of the recommendations.
In 2024, Germany’s PPA market was the most active in Europe with 40 recorded deals, two more than Spain, according to Veyt’s PPA database. However, in the first five months of 2025, only 10 deals were recorded in the country, placing it behind Spain, France, Italy and the UK. This suggests that structural reforms are indeed needed to accelerate market growth.
Linking PPAs with the planned Industrial Electricity Price scheme would give the government a better chance of securing EU approval and incentivising bigger electricity consumers to switch to renewable electricity.
A proposal to subsidise electricity prices for German energy-intensive industry without any renewable generation commitments is currently being reviewed by the Commission but is unlikely to receive the green light in its current form due to competition distortion concerns.
Zooming in on the new market design, the previous government was already considering four different renewable support scheme options designed to limit excess profits by investors which in turn should incentivise projects in prime locations to turn to PPAs as an alternative route to market.
Therefore, the new support scheme should primarily boost project build-out at sites that would otherwise not be developed, thus increasing total capacity expansion. The new government will likely choose one of the already discussed options with an announcement expected soon to give investors enough time to prepare for the changes.
The recommendations related to the German GO market could have a mixed effect on prices and the wider AIB regional dynamics, depending on how the changes are designed.
Linking the use of GOs more closely to government subsidies and tax relief schemes would further strengthen the demand for GOs. Germany already operates two state aid schemes (for indirect emission costs and for electricity levy discount) which Veyt has identified as primary driver of GO consumption, thus supporting Germany’s status as the largest GO importer in the AIB.
Historically, demand has outstripped GO supply in Germany due to the double-marketing ban which does not permit GO issuance to subsidised generators. The proposal to relax this ban in the future by offering subsidised GOs via auctions to smaller consumers could reduce the undersupply in the country and have a bearish effect on the wider AIB market.
However, defining which companies would have access to the auctions and under what conditions as well as which supported generators would be granted GOs, would be crucial to assess the exact market impact.
On the other hand, introducing granular certificates would have a counteracting effect on the potential bearish impact of issuing GOs to supported generators. This is because granularity is expected to lead to fragmented liquidity and limit demand to offtakers who have specific location and temporal requirements.
However, more details need to be revealed for its effect to be measured. In any case, the aim to enable real-time tracking of renewable production and consumption by introducing granular GOs would only work if the double marketing ban is removed for all supported generators, not only new ones.
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