Germany

Germany is the EU’s largest data centre market with approximately 3 GW of installed capacity distributed across around 100 large-scale facilities (each greater than 5 MW), 2,000 mid-sized data centres (100 kW to 5 MW), and 50,000 smaller IT installations (less than 100 kW). Surging demand for high-performance computing, AI infrastructure, and sovereign data storage is consolidating that position. Germany’s ambition, as set out in the Rechenzentrumsstrategie (‘the Data Centre Strategy’) published on 18 March 2026, is to become the EU’s prime hub for sustainable, resilient, and sovereign data centre infrastructure.

The German Government plans to double Germany’s general computing capacity, and quadruple the AI computing capacity, by 2030, to which end the Federal Government intends to implement short-term measures designed to improve the framework for inward investments in data centre projects.

Key contacts

Thomas Lang Partner [email protected]	Jörg Meinzenbach Partner [email protected]
Michael Schramm Partner [email protected]	Sebastian Schneider Partner [email protected]

Grid connection

Operators and applicable voltages

The German electricity grid comprises various voltage levels, from low voltage (up to 1 kV) through medium and high voltage (up to 110 kV) and extra-high voltage (at least 220 kV). Over 800 distribution system operators (“DSOs”) operate the low-, medium-, and high-voltage networks. Four main transmission system operators (“TSOs”) operate the extra-high-voltage transmission system. The federal regulator is the Federal Network Agency (Bundesnetzagentur).

Data centres usually own the assets necessary for their grid connection. For larger data centres, these assets typically include the data centre’s switchgear bay and the connection line to the cable end seals in the grid operator’s switchgear bay. The operator of a hosting data centre (in which the operator also operates the servers) qualifies as a mere consumer of electricity. By contrast, the operator of a co-location data centre can qualify as an electricity supplier, subject to certain regulatory requirements.

From “first come, first served” to “maturity” test

German grid operators face an increasing number of grid connection requests, in particular from battery storage and data centre projects. In many regions, the demand exceeds the available capacity for the foreseeable future, resulting in a significant backlog for data centre projects. Grid operators are required by law to provide non-discriminatory grid connection unless doing so is technically or commercially impossible or unreasonable. Most DSOs in Germany currently process grid connection requests in the order of their submission (under a “first come, first served” principle). To address the backlog, the German TSOs changed their grid connection procedure in 2026 to a maturity-based procedure (so-called Reifegradverfahren). Under this procedure, the TSOs assess applications based on a set of verifiable criteria and their likelihood of realisation. Applicants earn points based on the maturity of their project and the documents submitted and the TSOs process all applications collectively in fixed cycles, lasting approximately ten months.

To connect to and use the grid, data centre operators must normally conclude the following agreements with the relevant grid operator: a grid connection construction agreement, a grid connection agreement, a grid connection usage agreement, a grid usage agreement, and a grid management agreement. To decrease waiting times for a grid connection, data centre operators may use flexible grid connection agreements and cable pooling. Flexible grid connection agreements allow for take-off and feed-in restrictions, while cable pooling allows generation and consumption assets to share a single connection point.

Grid connection applicants bear the costs for the construction of the grid connection assets in their ownership. In addition, grid operators are entitled to charge a construction cost contribution (Baukostenzuschuss). This is a one-time payment made by the connecting customer for the construction or expansion of the grid. Grid operators calculate the construction cost contribution by multiplying the individual connection capacity (in kW) by the average capacity price (in € per kW) that grid users in the grid operator’s area have paid over the preceding five calendar years for the relevant voltage level. Additionally, TSOs reduce the construction cost contribution by up to 80% to account for regional differences in grid management costs.

Network tariffs and the 2029 Reforms: from rewarding steady load to pricing flexibility

Grid operators charge network tariffs and other levies for the offtake of electricity from the grid. Under the current regulatory regime, large electricity consumers, such as data centres, may benefit from reduced network tariffs if they have a steady and high electricity consumption profile. The Federal Network Agency is currently revising the regulatory framework for network tariff calculation and allocation, which is set to apply from 2029. As part of this regulatory revision, the Federal Network Agency aims to incentivise flexible electricity consumption instead of a steady and high consumption.

Power access and procurement

Corporate PPA structures in one of Europe’s largest markets

In Germany, data centre operators can choose from a wide range of electricity procurement models. Traditional options include full-service supply contracts, typically with fixed prices, tranche-based portfolio models under which suppliers manage price risks, and direct market access where operators trade electricity themselves. To meet renewable energy sourcing requirements, several renewable sourcing models are used. These include standard supply contracts combined with guarantees of origin, off-site (physical) PPAs, and on-site generation arrangements. Increasingly, operators are adopting hybrid strategies that combine traditional supply with corporate PPAs.

Germany has one of the most developed PPA markets in Europe. It draws on a diverse pipeline of underlying assets: projects from new renewable assets, plants that have voluntarily exited subsidy schemes, and older installations which are no longer eligible to receive subsidies. Physical PPAs, where electricity is delivered from a renewable plant to the balancing group of the data centre or its services provider, are the most common structure. On-site PPAs and self-generation offer greater control and can reduce grid costs, but are constrained by space and scalability. Virtual PPAs are also structurally possible in Germany, but remain less widely used.

Corporate PPAs with nuclear generators are not commercially available for data centre operators in Germany. Following completion of the shutdown of the last three nuclear plants in April 2023, Germany took its remaining nuclear power plants offline.

Evidencing renewable supply without an additionality requirement

The relevant renewable energy certificate system is based on GOs. These certificates evidence the renewable origin of electricity. Germany participates in the European certificate system, with mutual recognition across most EU Member States (refer to Section 4: EU-wide regulatory overview). Certificates can be freely imported and exported, producing a liquid and interconnected market.

GOs can be issued for both new and existing renewable assets, including plants that have exited subsidy regimes. Data centre operators are moving towards “high-quality” certificates linked to new-build renewable projects, typically procured through PPAs. This trend is reinforced by regulatory and policy developments, on the other hand, and corporate commitments such as those under RE100 and Science Based Targets, on the other. For example, the draft industrial electricity price support scheme requires that only PPAs financing new or modernised renewable assets qualify as eligible decarbonisation measures.

Nuclear power does not qualify for GOs and cannot be used to meet renewable energy requirements under the German Energy Efficiency Act. As a result, cross-border PPAs linked to nuclear power plants do not provide a recognised “green” attribute in Germany.

National strategy, investment incentives, and planning

Ambition to double compute and quadruple AI capacity by 2030

On 18 March 2026, the German government published its Data Centre Strategy. The Strategy’s stated aim is to recalibrate the German policy and regulatory environment so that investments in data centre infrastructure can keep pace with the demand generated by accelerating digitalisation and AI deployment across the economy. As noted above, the German Government is aiming to double Germany’s general computing capacity, and quadruple its AI computing capacity, by 2030. The government has identified three key areas of action, in which it plans to take 28 measures in the following 12 months:

energy and sustainability,
location and land, and
technology and sovereignty.

The Strategy proposes a range of measures, such as:

changing grid access rules to improve capacity allocation and transparency;
easing regulatory requirements governing energy efficiency and usage of waste heat;
the acceleration and harmonisation of planning and permitting procedures, including by developing a concept for preferential site designations; and
the introduction of special provisions for the allocation of the trade tax base (Zerlegung) where data centre operators maintain permanent establishments in multiple municipalities.

It should be noted that the Strategy is non-binding on both the German Government and the legislator, and further legislative steps are necessary to implement the proposed measures. It does not provide for any direct subsidy programmes for data centre projects, although data centre operators may be eligible for support under existing subsidy programmes for climate protection, heat utilisation, or energy efficiency measures.

How legal form and site selection drives the effective tax rate

German tax law does not provide for sector-specific tax incentives applicable to data centres. However, data centre operators can benefit from tax incentives available for renewable energy installations and battery storage, where they install and operate self-generated renewable energy facilities to power the data centre.

The applicable tax regime depends on the legal form of the operator. Corporations are subject to corporate income tax (currently 15%, but scheduled to be gradually reduced to 10% by 2032) plus a solidarity surcharge of 5.5% on the corporate income tax (giving a combined rate of 15.825%) and trade tax (minimum effective rate of 7%, averaging around 15% depending on the applicable municipality). Partnerships are subject to trade tax at the partnership level, while personal or corporate income tax is levied at the level of the individual partners depending on their respective legal form. There are no sector-specific tax rates or special economic zones in Germany, but the trade tax burden can vary significantly depending on the municipality in which permanent establishments are maintained.

Dual NIS2 and CER Directive implementation

Data centres in Germany are subject to the critical infrastructure regulatory regime. The German legislator has implemented the NIS2 Directive and the Critical Entities Resilience Directive through the German Act on the Federal Office for Information Security and on the Information Security of Facilities (Gesetz über das Bundesamt für Sicherheit in der Informationstechnik und über die Sicherheit in der Informationstechnik von Einrichtungen) and the Umbrella Act for Critical Infrastructure Protection (Dachgesetz zur Stärkung der physischen Resilienz kritischer Anlagen) (refer to Section 4: EU-wide regulatory overview). In Germany, data centres with at least ten racks and an IT-capacity of 3.5 MW classify as critical facilities. Server farms with at least 10,000 physical or 15,000 virtual server instances are also classified as critical facilities. The Federal Office for Information Security (Bundesamt für Sicherheit in der Informationstechnik) is the competent regulatory authority.

Operators of critical facilities are required to take appropriate, proportionate, and effective organisational and technical measures to prevent incidents affecting the information technology systems, components, or processes used by the operators for their facility. The measures must be based on an “all-hazards” approach, covering both IT-related and physical risks. Additional registration, reporting, and disclosure obligations apply. Non-compliance may result in penalties. A penalty can reach up to €10,000,000 and, where the operator’s annual revenue exceeds €500,000,000, up to 2% of that annual revenue.

Foreign investment screening: the 10% threshold and how to clear a German data centre deal

Data centre acquisitions or investments may trigger a filing obligation under Germany’s foreign investment screening rules. The Federal Ministry for Economic Affairs and Energy (Bundesministerium für Wirtschaft und Energie, “BMWE”) may review certain acquisitions of voting rights in a German company by a non-EU acquirer. Where the target company operates critical facilities or provides certain cloud computing services, notification is mandatory. The non-EU acquirer must file the acquisition with the BMWE without undue delay after signing. Data centres with at least ten server racks and an IT-capacity of 3.5 MW, and server farms with at least 10,000 physical or 15,000 virtual server instances, qualify as critical facilities for these purposes. Acquisitions of target companies that provide cloud computing services are subject to a notification requirement where the facilities used for that purpose (e.g. data centres or server farms) reach or exceed the same thresholds on the basis of their use for the respective cloud computing service.

The filing obligation applies where an investor directly or indirectly acquires at least 10% of the voting rights in the target company through a share deal. The authorities also count certain control rights – such as board seats or veto rights over strategic decisions – toward this threshold, where applicable. German FDI law does not permit investors to offset diluted voting rights when calculating an indirect acquisition. Even a minority stake at an intermediate holding level can therefore push the acquirer above the 10% threshold. Asset deals can also trigger a filing obligation. An investor who acquires a data centre’s key operational assets – rather than shares in the owning company – may also need to file with the BMWE. Greenfield investments are generally not caught by the German investment screening regime.

The transaction is subject to regulatory clearance by the BMWE. If the acquisition requires an FDI filing, the share transfer remains legally ineffective (schwebend unwirksam) until the BMWE clears the acquisition or clearance is deemed granted. Until clearance, the acquirer must not exercise any voting rights attached to the acquired shares (so-called “gun-jumping”). Violations may be sanctioned. The BMWE may also grant clearance subject to remedies, or, in the last resort, prohibit the transaction.

Data localisation in practice: GDPR transfers and German health and tax data constraints

German law does not impose a general data localisation requirement and does not prohibit non-European cloud services. Certain risk-based legal obligations may nonetheless operate as de facto localisation constraints. The GDPR permits transfers of personal data to countries outside the EU or EEA (so-called “third countries”) where they ensure an adequate level of data protection, as demonstrated by an adequacy decision of the European Commission, or where appropriate safeguards are in place between the parties to the transfer, such as standard contractual clauses.

German sector-specific rules can also create de facto data localisation obligations. These include, among other things:

the cloud processing of personal health and social services data, which is only permitted in EU Member States, EEA countries, Switzerland, or countries with an EU adequacy decision; and
the storage of accounting records relevant for tax purposes, which may only be stored in third countries under certain conditions and requires prior approval from the competent tax authorities.

Consents that set the German build timetable

German zoning law follows a three-tier system (state, regional, and municipal levels), with no provisions governing the permissibility of data centres. Permissibility is determined on a case-by-case basis, by reference to the zoning permissibility and the permits required.

Where a zoning plan applies, the permissibility of a data centre development depends on the designated specific land use areas under the Federal Land Use Ordinance (Baunutzungsverordnung). Data centres are commercial areas and industrial areas, depending on a case-by-case determination, with the decisive criterion typically being the level of noise and air emissions caused by the specific data centre. A key indicator for the classification of a project as materially disturbing (and therefore permissible only in industrial areas) is whether the installation requires a permit under the Federal Emission Control Act (Bundes-Immissionsschutzgesetz). To avoid such complex delineation, which may also be subject to legal challenges, municipalities and developers often opt for so-called special areas that can be tailored specifically to allow for data centres.

Where no zoning plan exists, fall-back provisions apply. Within a contiguous built-up area (im Zusammenhang bebauter Ortsteil), a project must fit with the character of its immediate surroundings, which is rarely the case for large-scale data centres. In outer areas (Außenbereich), data centres currently do not qualify as privileged projects, making permissibility particularly difficult to establish for large-scale projects. There is no settled case law addressing the zoning classification of data centres with large emergency power generators, a point of legal uncertainty that the Data Centre Strategy proposes to address through clarifying legislation.

A data centre does not, in itself, require an emission control permit. However, fuel- or gas-powered emergency power generators with a rated thermal input exceeding 50 MW do, in line with the IED’s implementation into German law. This permit has a concentration effect (Konzentrationswirkung), replacing most other permits for the emergency power generator (but not the data centre as such). The permit review process, which involves a public participation, typically takes around seven months, provided the submitted permit application documents are complete and accurate. The permitting authority may accelerate the process by approving early commencement of construction works while the review is still pending.

In addition, the data centre itself generally requires a building permit, governed by state law, with a process duration of approximately up to six months. Further permits may be required depending on the project design, including for transformer substations or cooling water supply. The competent authority is determined by state law. Germany has no unified consenting framework or fast-track permitting pathways for data centres, resulting in heterogeneous requirements and, in some cases, protracted proceedings.

In practice, close alignment with the involved municipalities (zoning) and state authorities (permitting) has proven key to expedited approval and implementation.

Environmental regulation and sustainability

An indirect Environmental Assessment trigger through large generators

Certain projects require an EIA prior to approval under the Environmental Impact Assessment Act (Gesetz über die Umweltverträglichkeitsprüfung), which forms part of the relevant permit procedure, and requires the applicant to report on the project’s significant environmental effects. Data centres are not directly subject to an EIA, but an EIA requirement may arise indirectly from auxiliary installations, such as emergency power generators qualifying as combustion engine installations. Emergency power generators with a rated thermal input exceeding 200 MW are subject to a mandatory EIA; a pending draft bill proposes raising this threshold to 300 MW. Below these thresholds, a case-by-case screening may be required. There are no proposals to extend mandatory EIA requirements to data centres.

At the EU-level, the European Commission has published a proposal for a regulation to accelerate EIAs (refer to Section 4: EU-wide regulatory overview), to which the German Federal Council (Bundesrat) has lodged objections in several respects. More broadly, a recent draft amendment to the Federal Building Code proposes simplifying environmental assessment requirements for zoning plans generally.

A separate habitat compatibility assessment may be required where the site affects a Natura 2000 area under the Habitats Directive or nature conservation areas protected under state law, adding further complexity and timeline risk to the consenting pathway. In addition, environmental offsetting requirements may apply on a case-by-case basis, particularly under the Federal Nature Conservation Act (Bundesnaturschutzgesetz). To date, no successful judicial or administrative challenges to data centre planning decisions on environmental grounds have been identified.

Hard targets for energy efficiency and reuse

Data centres in Germany must comply with a tightening energy efficiency regulation regime. The German legislator implemented the EED through the Energy Efficiency Act (Energieeffizienzgesetz) (refer to Section 4: EU-wide regulatory overview), which sets quantified targets going well beyond the EED’s minimum harmonisation requirements. Under the Energy Efficiency Act, operators of data centres commissioned after 30 June 2026 must achieve a power usage effectiveness (“PUE”) factor of 1.2 or lower.

Data centres must also comply with an energy reuse factor (“ERF”), targeting the proportion of waste heat that is recovered for use. The applicable ERF depends on the commissioning date and ranges from 10% to 20%, with 20% applying to data centres commissioned on or after 1 July 2028. The Energy Efficiency Act allows for exceptions to the ERF, including where the data centre operator has a written agreement with a nearby municipality or heating grid operator for waste heat utilisation. The data centre operator can be subject to administrative fines of up to €100,000 for at-fault non-compliance with the PUE or ERF requirements.

Furthermore, data centres must use 100% electricity from renewable sources, with effect from 1 January 2027. Virtual supply is sufficient to meet this requirement (meaning that physical supply from a renewable source is not required, and the requirement can be satisfied through contractual or certificate-based mechanisms). No administrative fine is currently provided for non-compliance, which leaves the obligation enforceable, in practice, principally through reputational and contractual channels.

CSRD transposition pending

The German legislator has not yet implemented the CSRD into national law (refer to Section 4: EU-wide regulatory overview). A first draft of the CSRD Transposition Act (CSRD-Umsetzungsgesetz), first adopted by the Federal Government on 3 September 2025 is still being debated in parliament. Pending implementation, national non-financial reporting obligations transposing the Non-Financial Reporting Directive (Directive 2014/95/EU), which the CSRD supersedes, continue to apply. In addition, the Energy Efficiency Act (refer to section 6.4.2) requires data centre operators to publish information on the data centre annually, disclose energy consumption to customers, and publish energy-saving implementation plans.

As far as can be seen, no greenwashing lawsuits have to date been brought against German data centre operators or their energy suppliers. The risk is, however, growing. The German Act against Unfair Competition (Gesetz gegen den unlauteren Wettbewerb) prohibits misleading environmental claims. Organisations such as Deutsche Umwelthilfe have pursued greenwashing cases against energy suppliers, setting precedents that could extend to data centres. In addition, the German legislator transposed the Empowering Consumers Directive (cf. Section 4: EU-wide regulatory overview) into national law in February 2026, with effect on 27 September 2026.

Real estate

Site control and structuring

Under German law, the real estate set-up for a data centre is a key value driver and demands careful structuring from the outset. Investors focus on legal certainty, long-term site control, and full bankability. Due diligence centres on title, encumbrances, third-party rights, contamination, and ground conditions, as statutory liability for contamination can attach to the owner regardless of fault. These aspects are typically addressed through a combination of tailored representations and warranties, specific indemnities, purchase price mechanisms, and, where appropriate, warranty and indemnity insurance.

Site control structuring is one of the most consequential decisions in any data centre project. Freehold acquisition, heritable building rights (Erbbaurecht) and commercial leases each determine the level of control, capital efficiency, and financing flexibility available throughout the asset’s lifecycle. Each structure carries its own risk profile and lender requirements, including step-in rights, assignability, and protection against termination, that must be carefully calibrated to the project. Where operators sub-let capacity to customers, an additional layer of structuring is required. German tenancy law provides strong statutory protections for tenants that can restrict operational flexibility if not properly anticipated and addressed at the outset.

Registered easements for power and fibre

Securing reliable grid connection and fibre connectivity requires enforceable rights to install and operate infrastructure across third-party land. From a real estate perspective, the key question is whether these rights are registered in rem in the land register, and are therefore binding on future owners, or whether they are merely contractual and thus significantly less protective. Where connections cross multiple properties, coordination and timing add further complexity. Early route planning, robust documentation, and a clear strategy for securing registered easements are therefore essential to ensure long-term operational continuity.