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Glossary · Energy industry & energy transition

Curtailment Risk (Abregelungsrisiko)

Curtailment risk Curtailment wind energy photovoltaics PPA grid congestion market value

Curtailment risk (Abregelungsrisiko) is the economic risk that a generating plant may be able to feed in, market or be remunerated for less electricity than it could technically produce. Its feed-in is then limited, postponed or prevented altogether. The term therefore refers not only to the technical process of curtailment, but to its expected effect on energy volumes, revenues, contractual positions, financing and the valuation of a project. Put simply: the wind blows and the sun shines, but part of the possible kilowatt hours never reaches the market or the offtaker, or earns no money there.

Curtailment risk is usually measured as lost energy in megawatt hours or as a percentage share of expected annual production. In project models it appears as a deduction from expected yield, for example relative to a P50 or P90 yield assessment. P50 is the median of the yield distribution: statistically, it is exceeded in half of the years and not reached in the other half. P90 is a more conservative value that is reached or exceeded with 90 percent probability. It is important to note that pure yield assessments usually reflect only weather and technology. Curtailment must be modelled separately. Because it often occurs precisely in high-yield hours, it can shift the entire revenue distribution of a wind or solar park.

Grid-related curtailment: redispatch in Germany

Grid-related curtailment occurs when a grid operator reduces feed-in so that lines or transformers are not overloaded or so that voltage and grid security are maintained. The trigger is usually a grid congestion and not a nationwide lack of demand. Since 1 October 2021, the former feed-in management under the EEG (German Renewable Energy Sources Act) has been transferred into the redispatch system of the Energy Industry Act (EnWG). Under the heading of Redispatch 2.0, renewable energy and CHP plants have since also been included in plan-based congestion management. Anyone who speaks of feed-in management today in Germany therefore generally means redispatch measures under Sections 13, 13a and 14 EnWG.

What matters for the risk is that grid-related curtailment in Germany is in principle compensated. There are two levels to this. With balancing compensation, the grid operator replaces the missing volume in the balancing group. The trader or direct marketer therefore does not have to buy back the curtailed volume itself. Financial compensation under Section 13a(2) EnWG is deemed appropriate if, taking the balancing compensation into account, it leaves the plant operator economically neither better nor worse off than it would have been without the measure. The basis of settlement is the lost energy (Ausfallarbeit), i.e. the estimated volume that would have been generated without the intervention.

According to the interpretation of the Bundesnetzagentur (Federal Network Agency), for subsidised plants in direct marketing the lost market premium is essentially to be reimbursed, not the full applicable value (anzulegender Wert). The operator already receives the market value of the volume through the balancing compensation. In individual cases, the net balance may even result in a payment from the plant operator to the grid operator. The residual risk therefore lies less in a total loss of revenues. It lies rather in inaccurate estimates of lost energy, in settlement and liquidity delays, in revenue components outside the compensation, and in future legal changes.

Market-related and contractual curtailment

Market-related curtailment is to be distinguished from this. At negative electricity prices, a plant can technically feed in, but it is often economically sensible to throttle production. There is no compensation from the grid operator for this. Subsidy rules also apply: under Section 51 EEG 2023 as applicable since 25 February 2025, the applicable value for new plants covered by the provision falls to zero from the first quarter-hour with a negative spot market price. For older plants, depending on commissioning date and size, hourly thresholds or exceptions apply. For certain plants, the lost periods are added to the end of the support period under Section 51a EEG. This shifts revenues into the future but does not replace them at equivalent value.

A third source is connection and contractual conditions. Some plants receive only a limited grid connection, for example with a fixed cap on feed-in capacity or with agreed flexible limitations. Whether compensation is paid for this depends on the respective agreement and legal basis and must be examined case by case. For economic viability, it makes a big difference whether a plant is limited only in a few peak hours or regularly in its highest-yield time windows.

Distinction from neighbouring risks

Curtailment risk is often confused with other risks. Price risk concerns the price at which generated electricity is sold. Volume risk, also called volume risk, describes how much electricity a plant actually generates owing to weather, technical availability or plant performance. Grid connection risk asks whether a plant is connected at all on time and with the planned capacity. Curtailment risk lies in between: the plant is connected and could generate, but part of the possible production does not reach the market or is not remunerated.

The market value is also a neighbouring but distinct concept. It describes the average revenue of a technology in the hours in which it feeds in. If the market value of photovoltaics falls because many plants produce at the same time, this is initially a price effect. If curtailment additionally occurs in the same hours, a volume effect is added. Both effects often reinforce each other but should be calculated separately in analyses. The same applies to the closely related profile risk.

In a PPA, the contract structure determines who bears the risk. In a pay-as-produced contract, the offtaker receives the volume actually generated. Curtailed volumes are then simply missing, and the contract regulates whether so-called deemed generation payments, i.e. payments for notionally generated volumes, or price thresholds apply. In baseload or fixed-volume contracts, the generator must deliver an agreed volume. It must procure missing volumes on the market, which can become expensive if scarce hours and curtailment coincide. Grid-related curtailment in Germany is indeed compensated through balancing. However, whether this compensation reaches the PPA offtaker or remains with the generator depends on balancing group allocation and contract clauses.

Order of magnitude and significance for projects

Nationwide, curtailment is not a marginal phenomenon. According to the Bundesnetzagentur, around 96 percent of renewable generation could be transported to final consumers in the third quarter of 2025. Financial compensation for curtailed renewable energy plants amounted to around 127 million euros in that quarter. The authority also describes a changed congestion situation: high photovoltaic feed-in increasingly generates east-west power flows. Such averages conceal large regional differences. Individual grid areas and sites can have significantly higher rates.

In wind and solar projects, most costs arise before commissioning, and there are hardly any fuel costs. Economic viability therefore depends on how many megawatt hours are actually sold or remunerated over the lifetime. For banks and investors, curtailment risk therefore influences debt service capacity, return on equity and safety margins. A very windy site can be financially less attractive than a weaker one if frequent interventions are expected there or if the compensation rules do not apply to part of the losses. Two projects curtailed to a technically similar extent can therefore be affected very differently in economic terms, depending on compensation, contract clauses and balancing group responsibility.

Common misinterpretations

  • "There is too much electricity": Usually there is too much feed-in at a certain time in a certain place relative to transport capacity and available flexibility. A bottleneck in northern Germany does not mean there is no demand in southern Germany.

  • "Every curtailment is waste": Technically, energy remains unused. From a macroeconomic perspective, however, limited curtailment can be cheaper than a grid expansion that fully absorbs only a few peak hours. What matters are the total costs of grid, storage, controllable loads, site selection and market rules.

  • "Compensation means no risk": Redispatch compensation in principle replaces only the loss arising from the measure, not every expected project value. Market-related curtailment and zero remuneration at negative prices remain uncompensated.

  • "More capacity means more usable energy": With high simultaneity, for example at midday for photovoltaics or in strong wind, additional installed capacity often yields less than proportionally more marketable energy.

Flexibility, storage and site selection

Curtailment risk falls when electricity can be absorbed better in space or time. Spatially, this means: grids transport the energy to consumption centres, and grid expansion eliminates structural bottlenecks. Temporally, this means: storage, electrolysers, heat pumps, charging infrastructure or industrial processes take up electricity in hours of high feed-in. Such flexibility increases demand precisely when generation would otherwise be lost.

A battery storage system at a solar park helps above all if it has free capacity in the critical hours, is connected behind the same bottleneck and is operated so that it charges during high local generation. If the bottleneck lies elsewhere or the storage is already full, it has hardly any effect. In siting decisions, grid capacity, local load and feed-in profiles therefore increasingly count alongside wind speed and irradiation. Anyone who analyses curtailment risk properly recognises early whether a project has mainly a grid, price, contract or flexibility problem. This determines which response fits: grid expansion, storage, different PPA clauses, a different site or local demand.

Sources

Related glossary entries

Edited by eCMS on 11.11.2026 18:23

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