Grid overload in Europe is now a subsidy problem

This week, European governments moved to relieve pressure on their grids, and subsidies have become the main lever. Germany went first, with the cabinet approving a reform that phases down support for small rooftop solar and cuts curtailment compensations for projects in congested areas. 

In the UK the debate heats up after a government appointed panel warned that battery operators could destabilise the grid during capacity market notice.

Check that out and don’t miss the deals of the week, such as: 

• CPP Investments and Ellia stepped into a 1.4GW interconnector between Germany and the UK, with CPP committing C$1bn for a 75% interest.
• Zenobē acquired sdp energie, inheriting six transmission-level BESS projects totalling 1.75 GW Terms were not disclosed. 
• Alpiq buys 90% of Harmony Energy, 400 MW under construction and a multi-gigawatt pipeline spread across Britain, Germany, France and Poland

Thanks for reading, and connect with me on LinkedIn if you want to discuss how I can help with your next M&A deal.

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Week Summary | From July 23 to 31, 2026

This week, Teaser Energy Europe caught 16 deals in the curation. Battery storage was the most heated sector, with seven transactions on assets, platforms and pipelines. Solar went down in second with five and wind with three. Italy alone accounts for six deals. 

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Grid overloads are pushing European governments to trim subsidies

Are grids becoming both the spine and the Achilles heel of the European renewables chain? Two stories this week exposed opposite sides of that duality.

The Telegraph reported that Britain’s battery boom could bring down the grid those batteries were deployed to stabilise. The warning came in a report by the so-called Panel of Technical Experts, handed to the new Energy Secretary, Miatta Fahnbulleh. The panel found that battery operators facing a capacity market notice have an incentive to charge in advance to fulfil their obligations, which could result in “a fast descent into a stress event”.

As explained by The Telegraph, capacity market notice is issued by the National Energy System Operator when it spots a looming electricity shortage, typically caused by low wind. It has historically been used to tell gas-fired plants on standby to warm up, but battery operators have recently broken into the same market. 

The experts’ concern is that operators would read the signal and start charging simultaneously, overwhelming the grid and triggering the very shortage the notice exists to prevent. Britain has around 7 GW of grid batteries in place, a figure expected to pass 20 GW by 2030.

While BESS raises concerns in Britain, in Germany the pressure comes from solar and wind generation running ahead of the network. On 29 July the German cabinet approved a revision of the Renewable Energy Act (EEG) and a grid connection package, both now heading to parliament. New projects in areas with grid bottlenecks will only receive automatic grid connection if they accept reduced curtailment compensation, waiving between 18% and 20% of payments over six years, with compensation dropped entirely in the most congested hotspots.

Where the subsidy debate is heading

The similarity between the British and German cases is limited to the grids, but the consequences point to the same place: subsidies.

In the UK, Kathryn Porter, of the energy consultancy Watt Logic, told The Telegraph that batteries are expensive and that a better option would be to stop building intermittent generation, since without it “we wouldn’t need batteries”, the extra grid infrastructure or the backup delivered by the capacity market.

Germany is moving in the same direction. The EEG revision phases out the feed-in tariff for small rooftop solar by 2029 and cuts the rate for small installations to 5.2 cents per kilowatt hour, on the economy ministry’s argument that the technology has reached market maturity. Economy minister Katherina Reiche called the reform a paradigm shift and said aligning new capacity with grid capacity should bring down redispatch costs, which the ministry puts at more than EUR 3 billion a year.

The paradox materialises when the subsidies needed to scale a competitive and crucial industry are trimmed at the same time as electrification of final energy consumption in EU is meant to rise from around 23% currently to around 32% in 2030, as set out in the Clean Industrial Deal.

As consumption and generation increase, networks will have to integrate 2.2 to 2.4 TW of renewables capacity to meet the 2040 EU targets. Renewable growth requires grid growth to match it. In its proposal for a revised TEN-E Regulation, published in December 2025 as part of the European Grids Package, the European Commission argues that grids need to adapt to support a more decentralised, digitalised and flexible electricity system, with millions of rooftop solar panels and local energy communities sharing resources.

The same proposal estimates that:

• by 2040, electricity transmission and distribution grids will require investments of EUR 1.2 trillion, and hydrogen networks a further EUR 240 billion;
• offshore renewables alone should increase by up to 360 GW by 2050, all of which needs connecting to shore, including through onshore grid reinforcements.

That does not erase the challenges the sector faces now, but it raises the question of whether the way they are handled today is making the challenges Europe faces next decade harder to address.

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