“Community energy” is a highly contested issue not only in the German energy transition governance but also in the recent legislative procedure to recast energy market legislation within the EU’s “Winter Package”. This paper analyses effects of the German provisions to privilege “community energy ac-tors” against the background of the objectives of the revised German renewable energy policy. It finds that the results of these provisions for community energy actors in the German auction scheme do not just represent an acceptable level of losses due to recognized trade-offs between the three main objectives – controlled RE expansion, actor plurality and cost efficiency – but instead a complete failure with regard to all three of these objectives. The paper suggests to clearly distinguish between the risks for small actors to take part in auctions from the added value, provided by these actors. This approach will help to define the necessary policy design elements that are suitable to enable small and community energy actors to participate in energy market activities, to provide the politically desired benefits, and to prevent disastrous policy failures similar to those in the German case.