Germany’s governing coalition has agreed to draft a policy package to expedite expansion of the electricity distribution grid, according to a joint statement. 

“Renewable energy sources and storage systems, industrial facilities, data centers, charging infrastructure, heat pumps – they all need to be connected to the electricity grid,” Chancellor Friedrich Merz’s conservatives (CDU/CSU) and the Social Democrats (SPD) said. “It is therefore crucial to speed up the expansion of the distribution network in particular.”

The parties promised to present a “distribution grid package” by the end of 2026 to speed up expansion, modernization, and digitalization of the networks and improve financing. The goal is to cut in half the time it takes to complete grid projects. 

A crucial hurdle for the energy transition has been grid development, and the high voltage transmission network has generally been the focus of policy issues. Increasingly, however, local and regional power lines that connect consumers to the system are becoming the priority, as insufficient distribution grid capacity and faulty regulatory processes hold back the roll-out of renewable energy and storage projects across Germany and Europe.

Right now, Germany’s coalition government is mulling a law reform to better align new renewable power projects with the grid’s capacity to transport the electricity. An early draft proposed scaling back grid connection priority for new projects, for example by limiting curtailment compensation payments in areas experiencing grid bottlenecks, and partially allowing grid operators to charge renewable investors for grid upgrades.

However, the financial viability of many projects could be impacted by the changes, the  renewables industry has warned, especially the proposal to forgo compensation payments for curtailments. This would make it much harder to assess their risk profile – and ultimately risk slowing down the energy transition. The reform is still being negotiated by the government.

The European Commission recently proposed a “Grids Package” that includes reform proposals to accelerate planning and permitting, as well as boost investments, and ultimately support the electrification of sectors that currently rely on fossil fuels. Germany’s coalition said it wants to use the package to speed up permitting of grid projects, but the new rules have not been negotiated yet between the European Parliament and member state governments. 

Plans to speed up grid expansion have been applauded by the BDEW, Germany’s largest energy industry association. “A planning and approval process lasting around ten years for the high-voltage grid cannot be acceptable in our industrialized country,” BDEW head Kerstin Andreae said. Faster approval procedures, streamlining environmental impact assessments and cutting red tape are the key factors in speeding up the process, she added.

The coalition has also agreed to prepare the rollout of a stripped-down version of intelligent electricity meters for small-scale consumers -– the “smart meter light,” a system with easier data communication.

Concerns over regulatory matters, hardware bottlenecks, and high costs has prompted Germany to move slowly in rolling out smart meters. The technology allows customers to adapt their electricity demand to periods of high or low supply, and enables dynamic tariffs that reward households for shifting consumption to times when power is cheap and plentiful. More flexibility on the consumption side will be crucial as the share of renewables grows. As of December 2025, only 5.5 percent of customers in Germany were equipped with smart meters compared with 63 percent in the EU, according to a recent EU report.

Local utility association VKU expressed cautious optimism about the proposal. “New regulatory interventions must not now lead to this already highly complex mammoth project being held up or made even more complicated, managing director Ingbert Liebing said. 

In contrast, Octopus Energy Germany, an electricity provider focused on dynamic prices and information about consumption in real time, was more exuberant about the decision, calling the introduction of a smart meter light “great news for the energy transition,” CEO Bastian Gierull said. “The company has been advocating for the rollout of these meters for some time. This will enable everyone in Germany to play an active part in the energy transition and benefit from affordable solar and wind power.”