The story of renewable energy in Germany is the story of an unintended but successful public-private partnership model. The Renewable Energy Sources Act of 2000, the EEG, did not create a PPP in the classic sense. There are no long contractual relationships between the state and private consortia, no negotiated risk-sharing models, no project companies. But it did establish a partnership structure in the broader sense, one that combines state guarantees with private risk appetite, just without the contract that would normally earn it that name.
The EEG guarantees operators of solar and wind installations a fixed feed-in tariff above the market price for twenty years. That guarantee reallocates investment risk. The investor carries the technology risk (will the plant perform as designed?) and the execution risk (will it be finished on time?). The state takes on the market-price risk: will the electricity actually be bought at that price? It does so by obliging grid operators, and ultimately electricity consumers, to cover the extra cost.
Structurally, the result is one of the largest risk transfers in modern German economic history, without the contractual safeguards of a classic PPP. The share of renewables in German electricity generation rose from under 7 percent in 2000 to over 50 percent in 2023. The cost of solar power fell by more than 90 percent over the same period, largely as a result of the scale effect that the EEG's guaranteed demand set in motion. A support program for a niche technology ended up shifting the global cost curve for solar power.
"The investor carries the technology risk and the execution risk. The state takes on the market-price risk, not through direct funding, but by obliging grid operators and consumers to cover the extra cost."
The cost debate around the EEG usually compares the surcharge, more than 25 billion euro a year in peak years, against zero rather than against an alternative scenario. Beyond PPP proposes the second comparison for partnership projects generally: cost against what would have happened without the guarantee, not against a world with no spending at all. For the EEG, that counterfactual can be traced unusually precisely, because the growth curve and the cost curve are both publicly documented. That makes the EEG a rare case: a partnership nobody called by that name, whose risk allocation can nonetheless be reconstructed exactly, technology risk with the investor, market-price risk with the state. Measured against that alternative scenario, the deal ended up favoring the state.