The European Commission has approved Germany’s capacity mechanism, clearing the way for up to €35.2 billion in state support for generation, storage and demand-side flexibility. The scheme will use competitive auctions and require new gas-fired power plants to be hydrogen-ready, with climate-neutral operation required by 2045.
The European Commission approved, under EU state aid rules, Germany’s capacity mechanism under the StromVKG, which is due to take effect in 2031. The legislation also provides for two additional tenders this year, each covering 4.5 GW of capacity, which are expected to be awarded largely to new gas-fired power plants.
The measures are intended to secure sufficient generation, storage and demand-side flexibility to ensure reliable electricity supply. Following the Commission’s approval, the German government can allocate an estimated €15.6 billion ($18.1 billion) to €35.2 billion to support the required capacity.
The Commission said the capacity mechanism must be open to all technologies, including generation, storage and demand-side response, as well as existing and cross-border capacity. Capacity required from 2031 will be procured through competitive auctions. Contracts will run for 15 years, while participating facilities must operate on a climate-neutral basis by 2045 at the latest. New gas-fired power plants will therefore have to be capable of running on hydrogen.
