Germany’s infrastructure and energy challenge: New dynamics and opportunities for infrastructure and energy investments in Germany
Societies are dependent on accessible infrastructure and energy. This applies even more to Germany as Europe’s leading economy. But Germany faces numerous challenges in the infrastructure and energy sector in the years to come. For several years now, there’s been a general backlog on infrastructure investments in Germany. At the same time, the more pressing issue of climate change has urged the need for investments in the energy sector.
A recent study showed that the investment requirement for the maintenance and expansion of rail networks and roads in cities, districts, and municipalities until 2030 totals around EUR370 billion.1 In addition, the German government has set the goal to transform its energy sector, so that by 2030, 80% of the electricity demand (approx. 500 to 600 TWh) will be supplied by renewable energy.2 By 2035, the energy sector – and by 2045 all other sectors of the German economy – should be largely carbon free. This requires investments in the energy sector of more than EUR20 billion annually until 2045.3
Despite these very ambitious goals and the challenges entailed with them, there’s a dynamic climate in the infrastructure and renewable energy sector in Germany. The government has introduced several bills to facilitate and accelerate investments in and expansion of infrastructure and renewable energies in Germany.
Governmental action to pave the way for renewables
For example, the most recent iteration of the Renewable Energy Act (Erneuerbare-Energien-Gesetz, EEG 2023), which came into force on 1 January 2023, is expected to boost renewable energy projects. It provides for several key features to make the development of renewable energy installations faster and easier: renewable energies are now – by statutory provision – in the overriding public interest and serve public safety. This means that in the future they will have priority over other interests in weighing decisions within planning and approval procedures. So the speed of planning and approval procedures is expected to increase significantly.
In addition, expansion paths and tender quantities have been raised and adjusted. For solar energy, the federal government has agreed on the solar package I (Solarpaket I). It contains a new regulation which, once it has come into force, will increase the expansion rates of solar energy from 7.5 GW per year in 2022 to 22 GW per year starting from 2023. The tender volumes are to be divided equally between rooftops and open spaces. By 2030, photovoltaic (PV) systems totaling around 215 GW are to be installed. The capacity of onshore wind energy is to be increased by up to 10 GW per year. The target is an installed capacity of around 115 GW for onshore wind turbines in Germany by 2030. The tender volumes for offshore wind energy, which is expected to play a vital role in the energy transition, will also be increased by the parallel amendment to the Wind Energy at Sea Act (Windenergie-auf-See-Gesetz, WindSeeG).
Similarly, the amendment to the German Wind Energy Area Needs Act (Windenergieflächenbedarfsgesetz, WindBG), which has not yet entered into force, the draft act aiming to promote solar installations by amending the German Energy Act (Energiewirtschaftsgesetz, EnWG) and the Renewable Energy Act, will accelerate the expansion of wind and solar energy in Germany, simplifying planning and approval procedures by reducing administrative processes (for more details see the article).
Boosting private investments in energy and infrastructure though the Future Financing Act
To achieve the transition of the energy sector and of the economy, more private capital and investments in energy and infrastructure is needed. For this purpose, the government has prepared the Future Financing Act (Zukunftsfinanzierungsgesetz, ZuFinG). Raising equity capital will be made easier through regulatory simplifications for IPOs, the simplification of capital increases under corporate law and the option to introduce multiple-voting shares.
The catalogue of permissible assets that can be acquired for German real estate funds will be expanded to include undeveloped land that can be used to build installations for the generation, transportation and storage of electricity, gas, or heat from renewable energy sources. This makes it possible for capital management companies to invest in installations even if no direct structural connection to a building exists.
The Future Financing Act also clarifies that the operation of both ground-mounted and roof-mounted rooftop systems is a permissible activity of the capital management company (Kapitalverwaltungsgesellschaft) for real estate funds, which also includes the sale of electricity under Power Purchase Agreements (PPAs). Up to now, some power plants have been rented out in part, as there was legal uncertainty as to whether electricity generation is a permissible activity for a German open-ended real estate fund without depriving it of its asset management character.
Increasing energy efficiency of all business sectors, including real estate
Besides striving for the transformation of the energy sector, all other business sectors, including real estate, have to increase energy efficiency. The goal is to reduce Germany's final energy consumption by at least 26.5% by 2030 compared to 2008. This will be achieved on the basis of the Energy Efficiency Act (Gesetz zur Steigerung der Energieeffizienz und zur Änderung des Energiedienstleistungsgesetzes, EnEfG), which is currently in the enactment process. Companies with an annual average total final energy consumption of the last three years of more than 7.5 GWh will have to introduce an energy or environmental management system. In addition, economic energy efficiency measures and waste heat recovery measures must be recorded in plans and published if the annual average total final energy consumption of the last three years amounts to more than 2.5 GWh.4 Companies will also have to avoid waste heat and use the waste heat as reasonably feasible. For data centers, the draft act includes specific energy efficiency requirements (for more details on the issue of data centers see the article).5
Similarly, the amendment of the Building Energy Act (Gebäudeenergiegesetz, GEG), will require, from 1 January 2024 onwards, that every newly installed heating system in new and existing buildings, whether residential or non-residential, must use at least 65% renewable energy.6
To develop electronic vehicle (EV) mobility, the government has introduced the Building Electric Mobility Infrastructure Act (Gebäude-Elektromobilitätsinfrastruktur-Gesetz, GEIG) that provides for requirements to install and uphold EV infrastructure and charging points in buildings. The requirements will be intensified according to the Masterplan II for EV infrastructure of the federal government7, which also provides for several enactment procedures, to further develop EV infrastructure in public and private spaces.
Riding the wave – the rise of infrastructure and energy investments in Germany
The next few years will be crucial for investments in infrastructure and energy as Germany is on its way to becoming a carbon neutral country while defending its position as one of the biggest economies in the world. Recent and ongoing governmental measures have established a dynamic but volatile environment for infrastructure and energy investments in Germany, which is proven by the latest German offshore wind auction results. Germany recently concluded a 7 GW offshore wind tender that generated significant interest and investment.8 This trend is expected to continue and is confirmed by the Renewable Energy Country Attractiveness Index issued annually by EY, according to which Germany has superseded China in attractiveness of renewable energy investments and is now in second place, after the US.9
Traditional and new asset classes in the energy and infrastructure sectors are (re)gaining momentum. Transmission and distribution networks for electricity supply (considered key for the energy transition and for the energy intensive industry in the southern part of Germany) are expanding. ESG upscaling measures have been implemented for existing buildings, especially via rooftop PV facilities in the real estate sector. Demand is increasing for data centers. And digital and EV infrastructure is continuing to expand.
Newly emerging markets, such as hydrogen, are also gaining rapid momentum and will expand the range of asset classes in the future. Hydrogen is seen as one of the key energy sources that will transform Germany’s economy to be carbon-neutral according to the government’s hydrogen strategy. A central hydrogen network has recently been approved. The network of more than 11,000 km will connect all major hydrogen feeders with all major consumers by 2032 (for more details on the issue of hydrogen as a source of energy see the article).
1 Tagesschau.de, Milliarden für die Sanierung kommunaler Verkehrswege nötig | tagesschau.de (30.08.2023), accessed 29.09.2023.
2 Bundesregierung, Mehr Energie aus erneuerbaren Quellen | Bundesregierung, (25.04.2023), accessed 29.09.2023.
3 Kreditanstalt für Wiederaufbau, Öffentliche Investitionen in den Klimaschutz: Versechsfachung notwendig, um Klimaziele zu erreichen | KfW (19.07.2022), accessed 29.09. 2023.
4 Lars Reubekeul, Christopher Ollech, Teil 1: Energieeffizienzgesetz (EnEfG) – Neue gesetzliche Anforderungen für Unternehmen | DLA Piper (25.05.2023), accessed 29.09.2023.
5 Lars Reubekeul, Christopher Ollech, Teil 2: Energieeffizienzgesetz – Neue gesetzliche Anforderungen für Rechenzentren | DLA Piper.
6 Martin Haller, Manuel Indlekofer, Auswirkungen des Gebäudeenergiegesetzes auf Immobilieneigentümerinnen und -eigentümer | DLA Piper (03.05.2023), accessed 29.09.2023.
7 Masterplan Ladeinfrastruktur II der Bundesregierung, accessed 29.09.2023.
8 German offshore auctions award 7 GW of new wind; future auctions must avoid negative bidding | WindEurope (12.07.2023), accessed 29 September 2023.
9 EY, Renewable Energy Country Attractiveness Index, ey-recai-61-report.pdf (06/2023), accessed 29 September 2023.
