GERMANY Trends and Developments Contributed by: Udo Olgemoeller, Nicolaus Ascherfeld, Johann von Pachelbel and Janina Müller, A&O Shearman
reform’s conclusion must contend with this uncer- tainty through conservative assumptions or regulatory change provisions. Demand-side pressures: data centres and grid scarcity The rapid growth in data centre demand is emerging as one of the most consequential pressures on Ger- many’s electricity infrastructure. Amendments to the Energy Efficiency Act ( Energieeffizienzgesetz – EnEfG) are planned to relax stringent efficiency and waste- heat requirements for data centres, and it is being discussed whether data centres could be prioritised for grid connection or whether capacity quotas could be allocated to individual industries. This raises profound questions about the allocation of scarce grid capacity between competing uses – renewable generation, industrial loads, storage, and digital infrastructure. The government’s strategies signal potential locational guidance aligned with grid constraints. For investors and their legal advisers, this is likely to become an area of commercial tension and, potentially, litigation: the maturity-based allocation introduces subjective scoring criteria susceptible to challenge, and grid connection delays may generate disputes under both administrative law and private law. Grid capacity is no longer a routine infrastructure input but a strategic asset. Energy Security and Market Design The capacity market The legislated introduction of a central capacity market was passed by both the German Parliament and the Federal Council in early July 2026, with first delivery from November 2031, and will represent Ger- many’s most significant market design reform. Auc- tions are planned for 2026 (approximately 9 GW) and 2027 (approximately 2 GW of new-build), alongside further technology-neutral rounds encompassing stor- age and demand response. Contracts may run up to 15 years, structured as reliability options with wind- fall rent caps and stop-loss settlements. Entry crite- ria include hydrogen-readiness for gas-fired plants, inertia requirements for storage, firm grid access, and European Economic Area supply chain resilience.
For project finance banks, this creates a new asset class: dispatchable capacity backed by long-term regulated revenue streams. The 15-year tenor aligns well with project finance structures, but the hydrogen- readiness requirement introduces technology transi- tion risk where gas-fired assets may need conversion within the contract term. Hydrogen and decarbonisation The regulatory framework for a hydrogen core network has been advanced, and 15-year carbon contracts for difference (CCfDs) provide cash-flow stability for low- carbon industrial investments. An EU-approved indus- trial electricity price scheme (2026–2028) offers relief towards EUR50/MWh on eligible consumption. How- ever, visible progress on the hydrogen backbone grid has remained limited, and investors must weigh the gap between regulatory ambition and physical delivery. Foreign Investment in Energy Infrastructure The regulatory framework Foreign investment in Germany’s power industry is generally permitted but subject to the German FDI screening regime. Non-EU/non-EFTA investments exceeding certain thresholds (starting at 10%) require mandatory notification and clearance by the Federal Ministry for Economic Affairs and Energy ( Bundesmin- isterium für Wirtschaft und Energy – BMWE). Non-EU bidders may also be excluded from renewable ener- gy tender procedures. Additional clearance may be required under the EU Foreign Subsidies Regulation. The OGE precedent and political signals This framework’s practical significance is illustrated by the German government’s in-depth review of Snam’s EUR920 million acquisition of a 24.99% stake in Open Grid Europe (OGE), Germany’s largest gas transmis- sion operator. The concern centres on the indirect ownership stake held by China’s State Grid Corpora- tion in Snam, given OGE’s role as a key player in the planned hydrogen core network. The case demon- strates that even indirect non-EU shareholdings can trigger enhanced scrutiny where the target operates strategically significant infrastructure. Investors must trace ownership chains to identify potential state link- ages that could activate review.
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