As Germany’s new government settles into its role, the country’s energy and infrastructure sectors are undergoing transformative changes and renewed momentum. This creates an ideal opportunity to explore the latest developments that are shaping Germany’s future and their implications for investors.
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Germany is implementing bold new policy initiatives for substantial public investment, including the proposed €500 bn infrastructure fund. The country is also focusing clearly on accelerating the energy transition and fostering private sector participation. These measures are laying the groundwork for potential growth and innovation across energy and infrastructure sectors. There are significant opportunities for both domestic and international investors across energy, transport, and digital sectors.
- A new massive infrastructure investment fund: Germany’s €500 bn infrastructure special budget (ISB), approved by the German parliament in March 2025, is a bold initiative set to reshape the country’s economic and energy landscape. Operating outside the ‘debt brake’, it will inject billions of euros into climate-neutral energy infrastructure, transport, digitalisation and other infrastructure projects. It will bolster existing initiatives such as the Climate and Transformation Fund (also known as KTF). The KTF will benefit from the ISB through staged funding, with around €10 bn per year. In addition to this annual commitment ISB is also set to commit around €150 bn between 2025 and 2029, with the entire ISB to be deployed within the next 12 years. The governing parties’ coalition agreement highlights ambitious targets, such as the modernisation of high-performance rail corridors as one of the key areas for which funds will be deployed, while further investment needs for waterways, ports, streets, tunnels and bridges have been identified in working papers. While the legal framework governing the details of the ISB is pending, stakeholders are already preparing for a positive impact on investments in German infrastructure and related industries. A leaked early draft of the implementing bill states that projects need to undergo “economic feasibility studies” and “performance reviews”, which set the parameters that eligible projects must meet. Further details on how ISB funds may be deployed will become available during the ongoing federal budget discussions, during which a business plan for the ISB will be finalised.
- Energy transition acceleration: The coalition government’s key priority is to ensure low, predictable electricity prices in order to enhance industrial competitiveness. It is focusing on expanding renewables (wind, solar, bioenergy, hydropower, geothermal) and modernising the grid to support increased renewable capacity. To accelerate the implementation of the projects, a future infrastructure law is planned that will regulate the acceleration of planning and approval procedures. These developments illustrate Germany’s accelerating effort to decarbonise its energy sector. While integration challenges (e.g. grid bottlenecks and storage needs) persist, the new government is contemplating adding gas power plants to the mix to ensure reliable energy production (see below for details).
- Private sector involvement: The coalition’s strategy involves aligning public funds with private investments via public guarantees, equity co-investments, and streamlined PPP frameworks. For instance, the proposed new ISB will combine state-backed guarantees with private capital for hydrogen and grid projects, addressing the €720 bn funding needed by 2030 for energy generation and transmission.
- Updated power plant strategy: The new government is set to fundamentally revise the “Power Plant Strategy”, the strategic framework underpinning the intended Power Plant Security Act. Central to this overhaul is a dramatic increase in ambition: the new target aims for the construction of up to 20 GW of gas-fired power plant capacity by 2030. This represents a substantial escalation compared to the previous coalition’s goal of 7 GW and underscores the government’s commitment to ensuring security of supply as Germany progresses through its energy transition. The expanded capacity is intended to provide reliable backup for renewable generation and facilitate a smooth phase-out of coal, while also prioritising plants that can convert to operate on green hydrogen in the future. Investors and stakeholders are closely monitoring the translation of these ambitious plans into actionable programmes and effective market incentives.
Latest energy and infrastructure deals and opportunities
- Renewables M&A: The renewable energy sector is witnessing robust M&A activity. For instance, TotalEnergies acquired VSB Group, a Dresden-based renewable energy developer, from Partners Group and VSB’s founder for €1.57 bn, Norges Bank Investment Management (NBIM) acquired a 49% stake in Nordseecluster for €1.4 bn from RWE and AXA IM Alts, a global leader in alternative investments, acquired a majority stake in ILOS, a renewable energy company focused on the development of photovoltaic projects, actively building a pipeline of solar projects in Europe's core markets.
- Grid modernisation projects: The drive towards for grid expansion to accommodate 80% renewable electricity by 2030 has created opportunities for large corporates and funds in high-voltage direct current (HVDC) transmission lines and battery energy storage systems (BESS). Recent tenders for 1.5 GW of solar energy and planned grid upgrades signal near-term investment opportunities. In this context, RWE is considering a divestment of its 25.1% stake in transmission system operator Amprion, while Commerz Real has acquired an indirect stake in Amprion of approximately 4.5% for its Klimavest infrastructure fund. TenneT, the largest grid operator in Germany and its sole shareholder, the Netherlands, are still in search of an investor for TenneT’s German operations while at the same time exploring an initial public offering (IPO).
- Transport sector investments: Deutsche Bahn’s claim for €150 bn by 2034 for rail network upgrades, supported by the new infrastructure fund, offers opportunities for corporates in rail digitalisation, demonstrating a general trend towards investments in sustainable mobility, including EV charging infrastructure and climate-friendly commercial vehicles.
- Hydrogen infrastructure: The government’s hydrogen strategy, including the connection of industrial centres to a hydrogen core network, presents near-term opportunities for private capital and corporates in production, storage, and distribution, backed by €1.5 bn from Germany’s recovery plan.
Legal and regulatory developments
- Renewable Energy Sources Act (EEG) amendments: Recent changes to the EEG, effective 2025, introduce important changes aimed at improving the integration of renewables into the electricity market (new photovoltaic and onshore wind installations are now suspended during periods of negative wholesale electricity prices lasting more than one hour (previously six hours)) while safeguarding investor confidence (raising maximum auction bid prices for solar and wind energy). This shift requires funds and corporates to adapt to dynamic pricing models, impacting project financing structures.
- EU Net-Zero Industry Act: Germany is actively shaping implementation of the EU Net-Zero Industry Act, focusing on streamlining permitting for “strategic net-zero projects” (e.g., electrolyser manufacturing, carbon capture, grid hardware). Germany will transpose these measures into national law by early 2026, creating new investment opportunities in industrial supply chains and infrastructure delivery models. Moreover, on 23 May 2025, the European Commission adopted four secondary regulations and a communication relating to the Net-Zero Industry Act (NZIA), that will help to scale up the manufacturing of net-zero technologies that reduce greenhouse gas emissions and leverage the competitive advantage of the EU's clean tech industry.
- Investment Ordinance (AnlV) Reform – more room for infrastructure risk capital: In February 2025, significant amendments to the German Investment Ordinance (Anlageverordnung, AnlV) entered into force, expanding the ability of insurers and pension funds to invest in infrastructure. The reform raises the cap on illiquid assets from 35% to 40% and introduces a dedicated 5% quota for infrastructure investments, covering both equity and debt instruments across sectors such as energy, transport, and digital infrastructure. It also broadens the definition of eligible infrastructure to include emerging asset classes like hydrogen pipelines and fibre networks. These changes address longstanding industry calls for a more modern and flexible framework and are expected to unlock substantial domestic capital for long-term infrastructure investments. See our briefing for more details.
And finally…. Real Asset or Fake News?
Congratulations to everyone last week who correctly identified that we do not yet have the science to home harness hamsters….
This week we are looking at all of the colours of the hydrogen rainbow.
Can you pick out which of the colours below is not the designation for a hydrogen production method?
- Green hydrogen
- Turquoise hydrogen
- Grey hydrogen
- Aquamarine hydrogen
- Pink hydrogen
- Blue hydrogen
Again, If you think you have spotted the work of fiction, please get in touch. We will publish the answer in our next post.
