Germany

Summary of investment context

Germany presents a compelling and evolving proposition for private infrastructure capital. Its framework, centred on regulated energy network revenues, a recently established suite of large-scale public investment platforms, and a legal architecture built around rules-based cash flows, offers investors long-duration, utility-style returns alongside growing political commitment to mobilising private capital at scale. A series of significant legislative and regulatory reforms adopted in late 2025 and early 2026 have sought to accelerate infrastructure deployment, improve planning certainty and broaden the investor base. We set out below the key features of the German market, explaining how the various support mechanisms impact risk allocation and predictable investment returns, and explore recent and upcoming changes and the impact these are likely to have on investment in the infrastructure sector.

Key Government policies and regulation attracting private capital

Economic regulation

With support for renewable generation in a transitional phase, Germany's core proposition for attracting private infrastructure capital is its regulated energy network model. Electricity and natural gas networks are subject to ex-ante revenue cap regulation by the Federal Network Agency (the “BNetzA”), which materially reduces demand and price exposure and supports long-duration, utility-style cash flows. This "incentive regulation" framework requires operators to compete against an efficiency benchmark: reducing controllable costs below the regulatory benchmark generates additional profit, while inefficiency directly erodes the equity return. For investors, the principal valuation issue is regulatory parameter risk rather than market volatility.

This framework is being materially reshaped under the so-called NEST reforms. The latest BNetzA decisions, adopted in December 2025, define the new regulatory regime for the revenue-cap based incentive regulation for electricity and natural gas networks; determining in particular the regulatory formula, efficiency benchmarking, productivity factors, and duration of the regulatory period, replacing the legacy ordinance-based framework from 2028/2029 onward. Key changes include shortening the regulatory periods to three years, calculating allowed returns using a WACC approach, and tightening efficiency benchmarking. This three-year period is shorter than in most other jurisdictions with a comparable regulatory regime, where regulatory periods typically run for at least four years and often longer. This shorter duration has both advantages and disadvantages: on the one hand, certainty as to the revenue cap and thus over projected returns is, as a matter of principle, secured only for those three years rather than for a longer period; on the other hand, changes in the RAB can be reflected in the applicable revenue cap more quickly.

Germany has also shown willingness to recalibrate regulated returns where legacy parameters could deter investment. For example, BNetzA changed the methodology for the equity return on new electricity and natural gas network investments, moving to an annually variable base rate plus a fixed risk premium.

A further structural innovation is the 9,040 km hydrogen core network, underpinned by a dedicated regulatory regime built around uniform tariffs and an intertemporal amortisation account running until 2055. The network is built and operated privately, financed through regulated user fees, with a federal backstop: the amortisation account is financed by a KfW credit line of €24 billion, acting as a subsidiary state guarantee and ensuring revenue certainty until 2055.

Germany's support model for renewables is transitioning from the current market-premium and auction architecture towards a market-based investment framework, starting in 2027. The existing system is expected to be supplemented by contracts for difference (CfDs) with clawback obligations, securing investments during low-price phases and clawing back excess profits during high-price phases.

• Effectiveness: The BNetzA's revenue cap regime broadly eliminates market price and volume exposure for network investors by setting allowed revenue ex-ante, converting cash flows into regulated, utility-style returns. The hydrogen core network's amortisation account converts demand and ramp-up risk into a near-sovereign credit exposure running to 2055, improving bankability, supporting investment-grade financing and increasing confidence that returns can be earned before demand is fully mature.

• Challenges: The NEST reforms introduce new sources of parameter risk. Shortening regulatory periods to three years increases the frequency of regulatory resets, and the net effect on return predictability depends on whether the BNetzA's future parameter discipline inspires comparable confidence to the legacy framework. The transition to CfDs for renewables, while providing floor revenues against low-price phases, limits upside potential through clawback obligations in high-price phases.

(b) Revenue support and tax incentives 

In January 2026, the government reached a general agreement with the European Commission covering 12 GW total capacity in respect of the Power Plant Strategy; Germany plans to tender this new dispatchable capacity in 2026, of which 10 GW will be subject to a long-term delivery criterion -the remaining volume is expected to be more technology-open. Subject to the ongoing legislative process, a more technology-neutral capacity mechanism will be implemented, signalling a clear shift away from the pure energy-only market towards policy-backed capacity revenues. For private investors, this addresses the revenue inadequacy for flexible generation and points toward a broader technology-neutral capacity market.

The Location Promotion Act, adopted in December 2025, creates greater scope for investment funds to invest in renewable energies and infrastructure. Specific measures include amendments to the investment tax and investment regulatory framework to remove uncertainty for tax-neutral roll-over of hidden reserves realised on the sale of real estate into reinvestments in similar qualifying assets; accelerated depreciation of up to 20% of acquisition or construction costs within the first four years for new rental housing construction; eased trade tax barriers, with income from renewable energy sources and electric vehicle charging stations being non-detrimental for certain trade tax exemptions for leasing companies provided it remains below 20% of leasing income; and exemption from trade tax at fund level for certain investment funds actively managing investments in renewable energy, property or infrastructure project companies — a material broadening from the previous position under which only passive investments had been privileged.

• Effectiveness: The anticipated capacity mechanism introduces a revenue floor that shifts dispatchable generation towards contracted availability income thereby improving return predictability and enabling longer-duration capital commitments. The Location Promotion Act removes regulatory classification barriers for investment funds, introduces degressive depreciation and broadens trade tax exemptions, improving post-tax equity returns and widening the investor base without altering project-level risk.

• Challenges: The Power Plant Strategy remains subject to the ongoing legislative process and the precise terms of the capacity mechanism have not yet been finalised, introducing execution and timing risk for investors seeking to commit capital ahead of formal confirmation. The tax measures introduced by the Location Promotion Act, while welcome, are incremental and do not address the broader structural constraints on institutional capital deployment in German infrastructure.

Government investment

Germany has established ambitious public investment platforms to mobilise private capital. The 2026 core federal budget provides for €58.35 billion in investments.

The centrepiece is the €500 billion credit-financed Special Infrastructure and Climate Neutrality Fund (the "SVIK"), established in 2025 and exclusively dedicated to financing investments over a twelve-year period. Of this amount, €100 billion is allocated to the dedicated Climate and Transformation Fund (the "KTF") and a further €100 billion is earmarked for investments by the federal states. Under the final federal budget law for 2026, the SVIK's economic plan amounts to €58.1 billion — a sharp increase from approximately €27 billion in 2025. Priority areas in 2026 include transport infrastructure (approximately €22 billion, primarily rail), digitalisation (€8.5 billion), hospital transformation (€6 billion) and energy infrastructure (€2.1 billion).The key points of the 2027 federal budget include the same focus areas.

Complementing the SVIK is the Germany Fund, launched in December 2025, which illustrates Germany's shift towards a platform-based, crowding-in approach. The federal government provides approximately €30 billion in public funds and guarantees, intended to trigger approximately €130 billion in total investment, with KfW coordinating implementation and serving as the principal investor interface. The Germany Fund is designed as a roof structure bundling multiple instruments; including guarantees, risk-sharing structures, loans, securitisations and equity participations. It targets three pillars: industry and SMEs; start-ups and scale-ups; and energy supply companies and energy infrastructure.

• Effectiveness: The SVIK provides fiscal visibility over a twelve-year horizon, reducing public-side delivery risk and policy continuity risk by signalling committed public capital for priority sectors. The Germany Fund's first-loss tranches, guarantees, securitisation tools and equity structures could absorb the downside risk that would otherwise price private capital out of target sectors, compressing risk premia and supporting higher leverage tolerance for private co-investors.

• Challenges: The Germany Fund is a mobilisation platform rather than a direct source of investment opportunities; investors should engage with KfW as the principal interface rather than expecting a procurement-ready pipeline of projects. The capacity of public authorities to deploy capital at the pace and scale envisaged by these programmes remains to be demonstrated.

Policy and operational regulation

Germany is treating planning acceleration as an investment-competitiveness tool in its own right. The Infrastructure Future Act, adopted by the government in December 2025 and currently in parliamentary proceedings — with entry into force expected in mid-2026 — represents a cornerstone of this agenda. The Act declares major infrastructure projects to serve an "overriding public interest," with military relevance of certain infrastructure introduced as a "priority consideration." Core procedural reforms include the abolition of spatial planning assessments for key transport projects, simplified route determination procedures without environmental impact assessments, expanded options for early commencement of works, and the removal of suspensive effect for legal remedies against road, rail and waterway infrastructure projects.

In the energy sector, Germany benefits from relatively formal strategic network planning. While formerly separate network development planning existed for the electricity and the natural gas sector, BNetzA approved the first aligned scenario framework for electricity and natural gas/hydrogen in April 2025, and the first aligned network development plan (NEP) is expected to be approved during the year 2026. The NEP processes now run on synchronised assumptions, including for power-plant and electrolyser locations, giving investors improved forward visibility of where regulated and adjacent infrastructure investment needs are expected to arise.

• Effectiveness: The Infrastructure Future Act targets time-to-build risk directly by abolishing spatial planning assessments, removing suspensive effect for legal remedies and enabling earlier construction commencement; translating for investors into lower development costs, shortened capital lock-up periods and improved timing certainty. The aligned NEP process gives investors a clearer view of where future network investment needs will arise, reducing origination uncertainty.

• Challenges: The Infrastructure Future Act has not yet entered into force and its practical impact on project timelines will depend on implementation. The NEP process, while providing strategic visibility, does not constitute a continuously refreshed, procurement-ready investment pipeline; the gap between formal network planning and bankable deal flow remains a structural feature of the German market.

Public Private Partnership

Public Private Partnerships (“PPP”) remain legally available in Germany, but are not the centrepiece of the current federal infrastructure capital model. Unlike in comparable jurisdictions, there is no central, programme-driven PPP framework: projects are implemented selectively, most notably in the transport sector. Investors active in the German market have noted that experience with PPPs, in particular co-investments in motorway sections, has in some cases resulted in significant losses, underscoring the importance of robust risk allocation frameworks as a prerequisite for the model to deliver stable returns.

The concept of private investor pools — the bundling of institutional capital for leveraging public funds in infrastructure deployment — is gaining traction. The Germany Fund provides a platform through which institutional investors can pool capital alongside public funds for energy infrastructure and other priority sectors, reflecting the scale of Germany's infrastructure investment gap and the fragmented nature of its municipal infrastructure landscape.

• Effectiveness: Where well-structured, PPP frameworks offer contractual risk allocation and stable, availability-based revenue streams. The Germany Fund's platform structure offers a potential aggregation mechanism for institutional capital seeking exposure to German infrastructure at a scale consistent with their investment mandates.

• Challenges: Past experience in German motorway PPPs, in some cases resulting in total losses, has contributed to investor caution around PPP structures in this jurisdiction. The absence of a central, programme-driven PPP framework limits standardisation and scale, increasing transaction costs and reducing the ability to deploy capital efficiently across a diversified project pipeline.

Infrastructure pipeline

Germany does not maintain a single, investor-facing national infrastructure pipeline comparable to those available in the United Kingdom or other peer jurisdictions. Pipeline transparency is strongest where projects are embedded in formal, statutory planning systems and weakest where assets are developed locally or across multiple authorities; a distinction with important implications for capital deployment strategies.

In the energy sector, the publicly accessible NEP process ensures transparency on planned network development. The hydrogen core network provides investors with a degree of visibility unusual for emerging infrastructure segments: rather than being planned through numerous individuals, uncoordinated projects, it was developed through a centralised and regulated process involving extensive public and third-party consultation, approved by the BNetzA and now defining binding and transparent expansion targets. The amortisation account mechanism, KfW-backed financing and applicable network fee regulation further provide a clearer link between strategic planning and bankable execution than is typical for emerging infrastructure segments. Federal transport infrastructure is also relatively transparent: the Federal Transport Infrastructure Plan 2030 and its project information system provide public access to project dossiers, appraisal logic and geodata for federal road, rail and waterway projects, while the rail requirements plan is embedded in statute. Digital infrastructure is transparent primarily through market and coverage data rather than through a forward-build project register. The gigabit register gives investors granular visibility on current broadband and mobile coverage, and therefore on white spots, competitive positioning and deployment gaps.

The data centre landscape is being impacted by the new federal strategy for data centres (March 2026), which declares these facilities as "strategic infrastructure" and sets a clear target to double capacity by 2030. This roadmap significantly improves pipeline transparency by introducing annual federal monitoring and prioritising brownfield sites, shifting the sector from a fragmented private market towards a coordinated national development plan. Transparency at the project level remains influenced by municipal planning speed and the newly implemented ‘first ready, first reserved’ grid allocation logic.

Large public investment frameworks such as the SVIK, KTF and the Germany Fund likewise improve top-down visibility of political commitment, sector priorities and public support, but they are financing and policy frameworks rather than project registers.

Pipeline transparency deteriorates markedly outside the core regulated sectors, primarily as a consequence of Germany's federal structure. Municipal infrastructure, district heating, hospitals, schools and local transport assets are planned and procured across thousands of individual municipal authorities with uneven administrative and financial capacity; visible need does not automatically translate into standardised, finance-ready opportunities. Tender-stage transparency is generally sound through federal e-procurement portals, but pre-tender visibility and standardisation remain uneven across jurisdictions.

Risk allocation and predictability of returns

The support mechanisms described above improve risk allocation and return predictability in distinct ways:

• Economic regulation — demand, price and regulatory-parameter risk: The BNetzA's revenue cap regime broadly eliminates market price and volume exposure for network investors by setting allowed revenue ex-ante, converting cash flows into regulated, utility-style returns. The hydrogen core network's amortisation account converts demand and ramp-up risk into a near-sovereign credit exposure running to 2055 thereby improving bankability and supporting investment-grade financing. CfDs for renewables provide floor revenues against low-price phases, though clawback obligations limit upside in high-price phases.

• Revenue support and tax incentives — missing-money and fuel-cost risk: The anticipated capacity mechanism introduces a revenue floor shifting dispatchable generation towards contracted availability income, improving return predictability. The Location Promotion Act removes regulatory classification barriers for investment funds, introduces degressive depreciation and broadens trade tax exemptions, thereby improving post-tax equity returns and widening the investor base without altering project-level risk.

• Government investment — construction, credit and counterparty risk: The SVIK provides fiscal visibility over a twelve-year horizon, reducing policy continuity risk by signalling committed public capital for priority sectors. The Germany Fund's first-loss tranches, guarantees, securitisation tools and equity structures could absorb downside risk, compressing risk premia and supporting higher leverage tolerance for private co-investors.

• Policy and operational regulation — permitting and timing risk: The Infrastructure Future Act abolishes spatial planning assessments, removes suspensive effect and enables earlier construction commencement which targets time-to-build risk. This translates into lower development costs, shortened capital lock-up periods and improved timing certainty. The aligned NEP process improves origination, sequencing and capital allocation decisions.

• Public Private Partnerships — allocation, transparency and aggregation risk: PPP structures offer contractual risk allocation and stable, availability-based revenue streams. However, past experience — particularly losses in motorway PPPs — shows that weak risk allocation can destroy value rather than stabilise it.

Recent legal and regulatory change

In the German legal system, a fundamental distinction is drawn between true retroactivity and quasi-retroactivity. True retroactivity occurs when a law changes the legal consequences of events that were already fully completed in the past; this is generally prohibited as it fundamentally undermines legal certainty. Quasi-retroactivity, which is common in the context of energy projects, occurs when new regulations affect ongoing situations or investments that have not yet been finalised. This is usually permissible, provided the regulator respects the principle of legitimate expectations, typically through reasonable transition periods.

An event with significant impact was the 2023 KTF ruling by the Federal Constitutional Court. While not a change to the legal or regulatory framework per se, it shook up the industry. The ruling declared the government's allocation of €60 billion into the KTF unconstitutional and therefore void. In consequence, the funding basis was deemed to have never lawfully existed — even though the government, project developers, and investors had all acted on the assumption that it did. For example, this resulted in delayed IPCEI funding awards and a temporary suspension of new government commitments, requiring the first auction for carbon contracts for difference to be postponed to March 2024.

Summary of regulatory environment

Investors in German infrastructure must navigate three interconnected regulatory frameworks. The broad FDI regime scrutinises critical infrastructure. Although expansive, interventions are selective – for instance, in 2025, fewer than 10% of cases faced in-depth Phase II reviews. On merger control, the Federal Cartel Office maintains a rigorous approach to merger control and has seen its sector inquiry powers strengthened in recent years. Meanwhile, a €400 million (£342.7 million)¹ transaction value threshold captures a high volume of deals with no substantive concerns, prompting ongoing reform debates. Underpinning this is a stable regulatory environment overseen by BNetzA with an established appeal mechanism providing a means of recourse for regulatory decision-making.

How burdensome is the FDI regime in this jurisdiction, and are there any notable trends relating specifically to infrastructure investment?

Germany's FDI regime is broad in scope, capturing both asset and share deals, but intervention is relatively selective in practice. The regime mandates notifications for acquisitions in certain sectors, while granting the Federal Ministry for Economic Affairs and Energy (BMWE) a five-year call-in right for acquisitions of 25% or more of voting rights across all other German companies. For investors seeking legal certainty, it is also possible to submit a voluntary filing. Investments by EU investors generally fall outside the regime’s scope unless they concern the defence sector or the EU investor has (non-insignificant) non-EU shareholders.

In 2025, 339 cases were notified to the BMWE. Over 40% of these were cleared within less than a month, with most remaining cases were resolved within the two-month Phase 1 deadline. In-depth Phase 2 investigations are rare, with only 31 cases (less than 10%) opened. On average, approximately 5% of all notified cases result in restrictive measures (remedies, and in very rare cases, prohibitions).

For infrastructure investors, mandatory notifications are typically triggered where the target operates critical facilities – this can include sectors such as energy, transport, health, water, IT and telecommunication, space and municipal waste disposal – provided the quantitative thresholds are met. The threshold for this generally captures infrastructure where any disruption would affect at least 500,000 people. The scope of the regime has also undergone recent expansion. In March 2026, the Critical Facilities Act came into force which imposes new obligations on operators of critical infrastructure (including relating to risk assessment, incident reporting, and registration). It also empowers government to designate facilities as critical even if they do not meet the relevant thresholds, and vice versa.

A notable risk factor for infrastructure transactions is the scrutiny applied to minority investors, particularly those with government ties. The level of scrutiny increases the more critical the infrastructure involved, even where this is led by “friendly” jurisdictions. In cases involving foreign government ties, the BMWE often tests whether the investor could pursue foreign government objectives. Key points the BMWE focuses on are the risk of potential disruptions to critical services, as well as access by foreign entities or foreign nations to sensitive information. Common remedies include information barriers, business continuity commitments, and management restrictions. In rare cases, divestitures of the sensitive parts of a business may be required.

What is the latest public policy direction for merger control in this jurisdiction, particularly regarding any trends relevant for infrastructure investment?

The Federal Cartel Office (FCO) maintains a rigorous approach to merger control and has seen its powers strengthened in recent years. For infrastructure investors, the landscape is currently shaped by several key trends.

• Expanded sector inquiry powers: In light of the recent energy crisis, the legislature has strengthened the FCO's sector inquiry powers, with the oil industry a current focus for the FCO. Although introduced to mitigate concerns stemming from the energy crisis, these powers can be applied generally and have already been deployed to examine, among other things, municipal waste disposal and EV charging infrastructure. Under the sector inquiry tool, the FCO can require a mandatory notification for transactions falling below the standard thresholds, and — where the FCO identifies a significant and persistent distortion of competition — impose behavioural or structural remedies, including mandatory divestitures.

• Focus on local market power: The FCO continues to scrutinise market power at the local level, both in its general merger control practice and through sector inquiries. This underscores the importance of conducting a thorough competitive assessment when investing in locally significant infrastructure.

• Reforms to the notification requirements: In June 2026, the German Government proposed an amendment to the German Competition Act that would increase the turnover threshold for notifications. In addition, the German Government proposes to reform the German transaction value threshold. Germany's regime requires mandatory filings for transactions exceeding EUR 400 million (GBP 342.7 million) in value where there is a sufficient domestic nexus. The FCO has acknowledged that this threshold disproportionately captures real estate investments that pose no substantive competition concerns and promised an improvement in this area. The current reform proposal would replace the notification requirement in transaction value threshold cases with a requirement to submit a short notice to the FCO and to wait for two weeks giving the FCO the opportunity to call the transaction in. This could allow investors, and in particular infrastructure investors, to close transactions quicker and with less burdensome submissions as their cases would be unlikely to be called in.

What is the record of sector-specific regulators overseeing infrastructure sectors in this jurisdiction and are there any key or upcoming developments to highlight?

Germany’s primary infrastructure regulator, the Federal Network Agency (BNetzA), oversees key sectors including energy, telecommunications, post, and railways. Operating as a cross-sector regulator, BNetzA fosters consistency across the industries it oversees and has a strong reputation for technical competence and reliability in promoting competition and protecting consumer rights. The broader German legal and regulatory systems are viewed as stable, transparent, and consistent with developed-market norms.

Investor confidence in Germany is further supported by a robust appeals process. Decisions made by the BNetzA can be appealed to the Higher Regional Court of Düsseldorf, which is highly specialised in energy and competition law and has a reputation for deep expertise and a willingness to overturn or amend the regulator's decisions. Further appeals on points of law can be elevated to the Federal Court of Justice.

The regulatory landscape relating to energy grids has recently undergone a fundamental shift following a landmark 2021 ruling by the European Court of Justice (ECJ). The ECJ’s ruling mandated greater regulatory independence, directly transferring the power to determine grid access and tariff methodologies from the government to BNetzA.² Consequently, previous government ordinances are being replaced by direct determinations from the BNetzA, with changes currently redesigning the rules for incentive regulation and grid fees.

Looking ahead, regulatory developments will be largely driven by Germany's ambitious energy transition targets (which aim for 80% of electricity to be derived from renewables by 2030 and climate neutrality by 2045). These targets require massive investment and a corresponding evolution of the regulatory framework. Key initiatives include BNetzA’s proposals to reform grid fees, requiring power producers to contribute to grid costs for the first time and comprehensive legislation to fully integrate hydrogen into the regulatory framework. This includes integrated network planning, extending unbundling rules to the hydrogen sector and establishing state-backed financing mechanisms to keep grid fees low during the market ramp-up phase.³

Finally, to support broader infrastructure development, the German government has recently introduced legislation to simplify and accelerate planning and approval procedures for fibre optic, mobile, and rail networks. For instance, the expansion of telecommunications infrastructure has been designated as an “overriding public interest” in a current legislative proposal which means they will, in principle, be given priority in approval procedures.

Contributing partners

Investment landscapeFreshfields

Carsten Bork

Regulatory environmentFreshfields

Frank RöhlingUwe Salaschek

For more information on GIIA’s work in this jurisdiction, please contact the GIIA policy team.