Germany’s electricity sector is entering a period of major transformation as rising power demand, renewable expansion, policy reforms and the phase-out of coal reshape the country’s energy system, according to GlobalData.

GlobalData’s latest report forecasts installed renewable capacity to increase from around 73 per cent of Germany’s total capacity in 2025 to nearly 88 per cent by 2035, while renewables could account for almost 80 per cent of electricity generation.

Offshore wind, solar PV and onshore wind are expected to drive growth, while thermal generation declines and gas-fired power takes on a greater role in providing system flexibility.

A new capacity market, expected to be fully operational by the end of 2027, is set to become a key tool for maintaining electricity supply reliability.

With nuclear power already offline and coal scheduled to be phased out by 2038, the mechanism is intended to ensure sufficient dispatchable capacity as renewable generation grows.

At the same time, the EEG-2027 reform is shifting renewable energy support away from traditional fixed feed-in tariffs towards competitive auctions and direct marketing.

Attaurrahman Saibasan, Power Analyst at GlobalData, said: “New projects will typically enter the market via competitive auctions or direct marketing arrangements, with smaller-scale installations receiving transitional support or bonuses during the switch. Larger projects must now optimise their generation, location, and operational profile, rather than merely depend on guaranteed compensation, thereby pushing the sector toward market-oriented performance.”

Electricity demand is also expected to rise sharply, increasing from approximately 466TWh in 2025 to more than 576TWh by 2035.

The growth will be driven by electrification across transport, heating and industry, creating additional pressure for investment in transmission infrastructure.

Germany will need stronger high-voltage networks to transport electricity from offshore wind farms in the North Sea and Baltic Sea to industrial centres in the south.

Delays in transmission construction and permitting could increase renewable curtailment and create supply constraints.

Saibasan said: “Alongside these macro shifts, market dynamics are growing more complex. Negative wholesale prices are already a concern in periods of high wind or solar output when demand is low and they create revenue volatility. As fixed support mechanisms fade, every project must factor in such risks, including exposure to price swings, grid access limitations, and project execution delays. Investors increasingly scrutinise auction rules, the transparency of capacity payments, regulatory certainty, and the timeline for permitting approvals.”

Investment is increasingly targeting solar PV and offshore wind, alongside hydrogen infrastructure, energy storage, flexible thermal generation and long-distance transmission.

Power-sector investment is expected to rise through the late 2020s as Germany works towards its targets of at least 80 per cent renewable electricity by 2030, a coal exit by 2038 and climate neutrality by 2045.

Saibasan concluded: “Ultimately, the success of EEG-2027 and the capacity market reform will be judged by Germany’s ability to deliver across four interlinked dimensions: reliability, affordability, market-driven flexibility, and system integration. Regulatory clarity, investment certainty, and infrastructure delivery are critical. If executed in synchrony, these changes promise not only to accelerate the Energiewende but also to position Germany as a benchmark for energy transitions in large industrial economies, proving that moving beyond fixed subsidies toward performance-based, resilient systems is both possible and necessary.” -OGN/TradeArabia News Service