Chancellor Angela Merkel hammered out the framework for a deal with state premiers on Wednesday on reforms to Germany's renewable energy law aimed at curbing the costs and controlling the speed of the future roll-out of green power sources.
After a meeting with the leaders of Germany's 16 states that stretched into the early hours of Wednesday, the government agreed to limit the expansion of onshore wind at 2.8 gigawatts in capacity per year, equivalent to about 1,000 wind turbines.
In addition, only a certain amount of new capacity will be permitted in north Germany to avoid overburdening the electricity grid.
"We have come a long way," Merkel told reporters following the meeting.
Saxony-Anhalt Premier Reiner Haseloff spoke of a "breakthrough," while his counterpart in Bremen, Carsten Sieling, said they had covered 90 percent of the ground.
Generous green subsidies have led to a boom in renewable energy, such as wind and solar power. But the rapid expansion has pushed up electricity costs in Europe's biggest economy and placed a strain on its grid.
The latest reforms are aimed at slowing the growth in renewables, which accounted for around a third of Germany's electricity last year.
With the government sticking to its target for an increase in the share of renewable sources to 40 to 45 percent of total electricity production by 2025, it will have to put the brakes on growth to avoid overshooting.
One of the biggest sticking points in the talks were plans to limit the amount of onshore wind, with critics saying that would endanger Germany's long-term energy goals and put jobs in the sector at risk.
The government also wants to move away from guaranteed set payments to a competitive auction system where green energy producers only receive payments for their power if they win a tender.
According to the proposals, an upper limit of 600 megawatts will be placed on solar power expansion. Installations that are smaller than 750 kilowatts of capacity will continue to receive support so as not to discourage rooftop solar panels.
The government and states failed to agree on upper limits for biomass, which is important in the southern state of Bavaria, while questions remain over the future expansion of offshore wind plants.
The government now hopes to approve the proposals in the Cabinet in coming weeks. The draft law is due to come into force at the start of 2017.