From risk to resource: How small-scale PV can boost grid stability

A pioneer in solar energy, Germany began investing in harnessing the sun’s power in the 1990s. Today, it has one of the highest outputs of solar energy in the world, having surpassed the milestone of 100 GW of solar capacity in January 2025. In 2024 alone, around 17 GW of new photovoltaic (PV) capacity was added, which constitutes over 25% of the EU27 total added solar capacity that year. This unprecedented growth signals a positive shift toward a clean energy future, but it’s also introduced new challenges. PV peaks are becoming more pronounced, resulting in increased grid congestion, PV curtailment and more frequent occurrences of negative electricity prices.

The problem isn’t PV – It’s uncontrolled residential PV

In Europe, Germany is a solar power leader, but there is a growing discourse that an excess of small-scale PV (i.e. residential rooftop PV) is overloading the grid. Large PV is mostly controlled, although their load is inflexible and grid capacity is limited. Small-scale PV, on the other hand, is not as controlled as it is on private, residential households. This small-scale PV feeds “dumbly” into the grid without knowing what the grid’s current needs are (i.e. more energy or less energy).

When you’re starting a new industry, you need money. Germany is a wealthy country, which is why it was the nucleus of the PV industry [in the 90s] – it was a good seeding ground.” – Robert van der Meulen, Watt’s up with energy?

However, the issue is not that Germany has too much residential PV – it’s the lack of intelligent coordination. Uncontrolled solar feed-in in the middle of the day leads to generation peaks that exceed demand, forcing grid operators to curtail production at increasing rates. Grid operators and industry representatives are calling on political leaders to approve immediate measures to better control small solar systems. They say that without the ability to control generation in critical situations, there is a risk that power lines would have to be temporarily disconnected from the grid to stabilize the system (i.e. brownouts). 

The solution to this is to not limit PV expansion but to unlock smart small-scale flexibility. When intelligently managed, residential PV can be transformed from a grid liability into a valuable resource. Home energy management systems (HEMS) play a pivotal role in achieving this, ensuring that small-scale PV panels work flexibly with other assets, such as batteries, heat pumps and EVs, as well as working in harmony with the grid to support stability.

Regulations for the control of PV systems are urgently needed…to mitigate the problem of PV peaks.” – BDEW Head Kerstin Andreae, Neue Osnabrücker Zeitung 

The problem with uncontrolled rooftop PV growth

At the heart of this challenge is the inflexibility of standalone PV systems. Without dynamic coordination, most installed rooftop PV panels simply feed excess solar energy into the grid, exacerbating midday peaks and intensifying network strain. This results in:

• PV curtailment: Solar power in Germany had curtailments totalling 603 GWh in the second quarter of 2024, representing a 78% increase compared with the second quarter of 2023.
• Negative electricity prices: In 2024, there were 457 hours of negative wholesale market prices occurred, a 52% rise from 2023. This signals an increase in the periods of oversupply. 
• Underutilized flexibility: Many residential energy assets remain disconnected from smart energy management solutions, limiting their potential to support the grid.

The bright side to Germany’s excess small-scale PV

While others may only see the risks and challenges associated with Germany’s large amount of small-scale PV, we recognize it as a powerful tool for flexibility. Rather than curbing rooftop solar expansion, we say: How can we make the most of all this decentralized energy? 

The answer lies in unlocking small-scale flexibility – leveraging the growing number of residential PV systems, batteries, EVs and heat pumps to actively support grid stability instead of passively contributing to congestion. With the right energy management approach, these distributed assets can store, shift and optimize energy consumption, transforming what was once seen as an uncontrolled risk into a coordinated, grid-supporting resource.

Untapped opportunity: Small-scale flexibility

A growing body of research suggests that small-scale flexibility can play a decisive role in stabilizing the grid. According to a 2023 study by Agora Energiewende:

• Small-scale flexibility could reduce peak grid load by up to 30% if integrated effectively.
• If 40% of households with PV installed a smart battery system, curtailment could drop by 50%.
• Residential flexibility could provide up to 15 GW of grid balancing capacity – a contribution comparable to large-scale power plants.

Key enablers of this energy flexibility are the assets already present in many homes:

• PV systems with storage: Instead of feeding excess solar power directly into the grid, a PV system with storage can retain and shift energy use to times of higher demand or feed energy back into the grid when needed, thus reducing grid strain and increasing self-consumption.
• Heat pumps: Shift heating and cooling demand to periods of high solar generation.
• Electric vehicles (EVs): Dynamically charge electric cars based on solar availability and electricity price signals.

Without intelligent coordination, these assets remain passive consumers of energy, but with the right management solutions, they can actively shape grid stability. This small-scale flexibility can also support market efficiency by enabling residential assets to respond to intraday market price signals. With increasing shares of renewables, electricity prices fluctuate significantly throughout the day, creating opportunities for dynamic load shifting. This further adds to the grid stability while also delivering financial benefits to consumers.

The Solar Peak Law: Managing surplus solar for a smarter grid

Germany’s regulatory frameworks are increasingly acknowledging that the surge in residential solar is not just a challenge, but also an opportunity – one that can be harnessed rather than restricted. On February 14, 2025, a set of legislative amendments aimed at managing solar energy peaks came into effect. Collectively referred to as the "Solar Peak Law" (Solarspitzengesetz), this term describes a package of changes to multiple laws, all approved by the Bundestag on the same day. These amendments impact key regulations, including the Energy Industry Act (Energiewirtschaftsgesetz, EnWG), the Renewable Energy Sources Act (Erneuerbare-Energien-Gesetz, EEG), and the Law on Metering Point Operation and Data Communication in Intelligent Energy Grids (Gesetz über den Messstellenbetrieb und die Datenkommunikation in intelligenten Energienetzen, MsbG).

Germany’s Solar Peak Law

To support Germany’s rapid expansion of residential PV systems, the Solar Peak Law introduces key measures to better manage solar energy surpluses and enhance grid stability. The regulations apply to new PV systems with an output of 2 kWh or more and focus on optimizing self-consumption, grid integration and market efficiency.

Key changes include:

Suspended feed-in tariffs during negative electricity prices

As negative electricity prices become more frequent, the new law temporarily halts feed-in tariffs when prices drop below zero. However, these “lost” hours can be reclaimed over a 20-year period (175,200 hours), ensuring long-term compensation. This change is designed to incentivize homeowners to store and use their solar energy rather than feeding it into an oversupplied grid.

Feed-in limits for PV systems without smart meters
Under Paragraph 14a EnWG, prosumers with a PV system, battery, and smart meter – which energy providers are now required to offer upon request – can feed electricity back into the grid without restrictions. In contrast, PV systems without a smart meter will be limited to feeding in 60% of their nominal capacity, encouraging the adoption of intelligent energy management solutions.

A February 2025 article from PV Magazine highlights the law’s broader goals:

“The government's declared aim is to avoid generation peaks in the future, such as those that occur when many photovoltaic systems feed into the grid at the same time. The law is intended to create incentives for investment in storage. At the same time, the government wants to use the law to stabilize market values ​​on the electricity exchange and protect the grids from excessive strain.” 

Because these amendments are still – only introduced in December 2024 – consumers and installers may have lingering uncertainties. However, one aspect is certain: these updates are expected to pave the way for HEMS to simplify energy systems, enabling better coordination of small-scale residential PV and ensuring solar power is used where and when it’s needed most.

HEMS as the key to unlocking small-scale PV’s flexibility

A HEMS acts as the intelligence layer that connects and optimizes these assets. By integrating real-time data, predictive analytics and price signals, HEMS enables:

• Load shifting: Automatically aligning energy consumption with renewable generation patterns.
• Grid balancing: Reducing local congestion by dynamically optimizing household demand.
• Energy savings: Households can cut energy costs (sometimes by up to 30%) through self-consumption and dynamic tariffs.
• Monetizing flexibility: By using PV surplus or by drawing energy from the grid when demand is low, households can benefit from cheaper energy prices and store excess energy at this time. Then, when demand is high and prices increase, households can (with the help of service providers) discharge/sell energy back into the grid.

For example, consider the role of HEMS with a PV system:

• Without HEMS: The PV is producing energy without considering external factors such as the current and/or forecasted supply and demand of the grid, market prices, etc.
• With HEMS: The PV system’s production is optimized so that energy is fed into the grid only when necessary. 

Small-scale energy flexibility is not just an efficiency gain – it’s the foundation of a decentralized, resilient energy system. Only with smart management does harnessing the power of the sun become a valuable resource rather than a risk.”  – Carsten Schäfer, Product Manager Innovation at gridX

Why the energy transition needs small-scale flexibility

When it comes to too much residential solar energy, Germany is not alone. The Netherlands – largely a result of net metering – is also experiencing a solar surplus, with rooftop PV installations climbing and grid congestion increasing as a result. It’s safe to assume that as PV installations become more affordable, the adoption and use of solar energy will continue to increase across all European countries. And this requires more than just better regulations – it demands a smarter, more connected energy system that integrates decentralized energy assets seamlessly.

The key to this transformation lies in HEMS, which brings intelligence and connectivity into homes, enabling real-time optimization of solar generation, storage and consumption. By dynamically managing PV energy, batteries, EVs and heat pumps, HEMS turns residential solar into an active, grid-supporting resource rather than a passive generator. This shift reduces grid strain, prevents curtailment, and ensures that surplus solar power is used efficiently instead of being wasted. Without smart flexibility, rooftop PV will remain an underutilized asset rather than a cornerstone of a resilient energy system.

To realize the full potential of small-scale flexibility, collaboration across the energy sector is essential:

• Policymakers and grid operators must embrace small-scale flexibility as a core grid resource, integrating it into regulatory frameworks and market mechanisms.
• Utilities and HEMS providers must accelerate the deployment of intelligent energy management solutions to ensure residential assets contribute to grid stability.
• Consumers and installers should embrace smart energy management technologies to optimize self-consumption and reduce grid dependence.

The energy transition will only succeed if we unlock the flexibility that already exists in our homes. Regulatory frameworks are catching up, but the market must act now.” – Irene Guerra Gil, Energy Market Expert at gridX

Germany’s rooftop solar boom is an opportunity, not a threat. Small-scale PV, when intelligently managed, can serve as a crucial asset for grid stability rather than a source of disruption. The missing link is HEMS, which enables dynamic, flexible control of decentralized energy resources. Without such solutions, small-scale rooftop PV will remain an unrealized potential rather than an integral component of a resilient and efficient energy system.