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Glossary · Energy industry & energy transition

Compensation payment

compensation payment Curtailment Lost energy redispatch Feed-in Management system costs grid congestion

In the electricity system, a compensation payment is a payment to the operator of a facility when a grid operator intervenes and the facility therefore feeds in, stores or draws electricity differently than planned. In most cases the facility is technically available. The typical trigger is a grid congestion. In everyday usage the term is mainly used for the curtailment of wind and solar plants, for the former feed-in management and for today's redispatch. The German Energy Industry Act (Energiewirtschaftsgesetz) does not speak of compensation but of balancing compensation (bilanzieller Ausgleich) and financial compensation (finanzieller Ausgleich). Financial compensation is considered appropriate if, after crediting the balancing compensation, it leaves the operator economically neither better nor worse off than it would have been without the measure.

Legal framework in Germany

Until 30 September 2021 there were two separate procedures. Conventional power plants were controlled via redispatch. Renewable-energy and CHP plants were curtailed under the EEG through feed-in management and compensated under a separate hardship rule. Since 1 October 2021, Redispatch 2.0 has applied as a uniform procedure on the basis of the amendment to the Grid Expansion Acceleration Act (NABEG 2.0). It covers generation and storage facilities with a rated capacity of 100 kW or more, as well as smaller facilities that a grid operator can remotely control at any time.

The central provision is Section 13a EnWG. It obliges these operators to adjust their active power, reactive power or electricity consumption on request, or to tolerate such adjustment. The wording refers to transmission system operators; via Section 14 EnWG the rule also applies to distribution system operators. For compensation the law distinguishes two levels. Balancing compensation concerns the balancing group of the affected feed-in or withdrawal point. The grid operator offsets the missing or additional energy quantity there. As a result, the balance responsible party generally does not incur a shortfall as a result of the measure for which it would have to pay balancing energy. Financial compensation, by contrast, concerns the facility operator and offsets its remaining economic disadvantage.

Under Section 13a(2) EnWG, financial compensation may, depending on the case, comprise the following components:

  • necessary expenses for the actual adjustment, for example additional fuel when ramping up (generation expenses),

  • the proportionate consumption of the facility's value, calculated from commercial-law residual values and remaining useful lives,

  • proven lost revenue opportunities, to the extent that they exceed the first two items,

  • expenses to make an idle facility ready for operation or to postpone a planned overhaul,

  • for curtailed renewable-energy plants and for CHP electricity, the lost revenues plus additional expenses.

The provision also sets limits. The facility operator must refund saved expenses, for example unused fuel. Costs that would have been incurred even without the measure are expressly not reimbursed. These include standby readiness expenses and interest on tied-up capital. Financing costs are therefore not a separate reimbursable item. They are affected only indirectly, where lost revenues are replaced. A special rule applies to electricity that the transmission system operator markets itself under Section 57 EEG, essentially electricity with a fixed feed-in tariff: here, the balancing compensation is not credited against the financial compensation.

Lost energy (Ausfallarbeit): a calculated quantity is settled

For wind and photovoltaic plants, the payment depends mainly on the lost energy (Ausfallarbeit). This is the quantity of energy, in kilowatt-hours or megawatt-hours, that the plant would presumably have fed in without the intervention. It cannot be measured, because the electricity was never generated. It is therefore calculated using defined methods, for example from weather and measurement data, power curves, reference plants or planned values. A simple illustration: a wind farm could have delivered 10 MW for one hour given the measured wind, but was only allowed to feed in 4 MW. The lost energy is then arithmetically 6 MWh. The lost revenues are determined on that basis, for example the applicable value (anzulegender Wert) from the market premium. The payment thus relates to a calculated quantity and not to a physically delivered one.

For conventional power plants and storage facilities, the focus is more on costs, and in both directions. A facility that is ramped down saves fuel and must have this saving credited. A facility that is ramped up receives reimbursement of generation expenses, start-up costs and, where applicable, consumption of value. Here the compensation is therefore not a price per kilowatt-hour not generated. It is part of a settlement intended to economically neutralise the ordered measure.

Distinction from remuneration, damages and market price

Feed-in tariffs, market premiums or exchange revenues pay for electricity that was generated or marketed. A compensation payment, by contrast, offsets the disadvantage resulting from an intervention that prevents or alters a possible feed-in. It is not additional support, but for EEG plants it is linked to their revenue entitlements. Damages is also the wrong word. Damages usually presuppose unlawful or culpable conduct. Redispatch measures, by contrast, are provided for by law and serve grid security. The compensation is the statutory consequence of a permitted intervention.

What is always decisive is the reason why a facility is not feeding in. A grid-related intervention under Section 13a EnWG triggers the compensation. If, however, an operator or direct marketer switches off its plant on its own decision at negative prices, that is a market decision and not a grid-related intervention. The same applies to outages due to defects or maintenance. Conversely, a plant can also be curtailed when the exchange price is positive. That is due to the grid congestion, not the market.

Why the payments arise

Lines and transformers have thermal limits, and voltage and frequency must remain within permissible ranges. A grid congestion arises when more is fed in at one location than the grid can transport to the consumption centres. Germany forms a single bidding zone with Luxembourg. Wholesale trading therefore assumes that electricity can flow within the zone without congestion. Only afterwards does redispatch adjust the schedules to physical reality. Plants upstream of the congestion are curtailed, plants downstream are ramped up. Costs arise from this sequence.

These costs are considerable. According to the Federal Government's statements to the Bundestag, grid congestion management cost around EUR 2.95 billion in 2024 and around EUR 3.08 billion in 2025. Of this, financial compensation to operators of renewable-energy plants accounted for EUR 554 million (2024) and EUR 435 million (2025). The larger part concerned redispatch with conventional market power plants (2024: EUR 1.23 billion, 2025: EUR 1.18 billion) as well as the standby provision and call-up of reserve power plants. In addition there was netted countertrading of around EUR 0.1 billion per year. The frequently cited figure of around three billion euros is therefore not equivalent to compensation for curtailed green electricity. The costs are ultimately borne by final consumers, mainly through grid charges. They thus form part of the system costs of electricity supply.

Typical misconceptions

It is often said that money is paid here for electricity not produced, without any consideration. That falls short. The plant was available, and the grid operator limited its feed-in for grid reasons. Payment is made for the consequences of this intervention, not for a delivery of electricity. It is equally wrong to equate curtailment with a nationwide electricity surplus. Often the surplus is only regional, and elsewhere a power plant has to run additionally at the same time. In macroeconomic terms, the loss therefore consists not only of the lost kilowatt-hour but also of the replacement generation.

Incentives, locations and political debate

Largely full compensation lowers the investment risk for plants at congestion-affected locations and keeps financing inexpensive. However, it weakens location signals. If less is compensated, the risk shifts to the operators, and capital costs may rise. In 2026 there was a legislative dispute over this. The government draft of the so-called grid connection package (Netzanschlusspaket) provides for a redispatch reservation (Redispatch-Vorbehalt). Grid operators are to be able to designate capacity-limited grid areas. New wind and solar plants there are to receive no compensation for part of their curtailed annual quantities: according to reports up to 20 percent, and 18 percent for wind farms in priority wind areas. In the Bundestag hearing in October 2026, a majority of the experts rejected the reservation. As of November 2026, the law has not yet been adopted. Until then, compensation under Section 13a EnWG applies to grid-related curtailments.

Two levers can reduce the payments. The first is flexibility: storage facilities, electrolysers, heat pumps or industrial processes in congested regions can absorb surplus electricity. However, this only works if connection, metering, controllability and market rules allow it. The second and lasting lever is grid expansion. The sum of the compensation payments shows where transport capacity is lacking. It does not, however, replace grid planning, for which the location, duration, affected equipment and alternative costs of the congestions must be evaluated.

Sources

Related glossary entries

Edited by eCMS on 11.11.2026 19:47

© 2026 Erik Schmidt. All rights reserved. Quotations with a link to the source are welcome.