The European Commission has given the green light (2 September) for Germany’s plans to provide state support for new backup power plants and electricity storage meant to secure electricity supply from 2031 – at times when intermittent wind and solar energy is insufficient to meet demand.The green light from the Commission is the last formal step needed to implement the auctions in Germany, economy minister Katherina Reiche said. The new law to ensure supply security would now “provide greater certainty for planning and investment, thereby ensuring a more reliable and, in the long term, more affordable electricity supply,” she said. Environmental NGOs criticised the EU approval. Advocacy group Beyond Fossil Fuels warned that Germany would lock in its reliance on fossil fuels, arguing that the energy crisis had exposed the risks of depending on global gas prices. “The German economy will remain strapped into the fossil-fuel rollercoaster for longer and Germans will be punished with price shocks and hefty electricity bills,” senior campaigner Alexandru Mustață said.Germany launched the first auction for government support in July, with a second round to follow in November. Both are aimed at so-called "long-term capacity", which is capable of supplying electricity continuously over an extended period, ensuring that even prolonged periods without sufficient renewable energy generation can be covered. It is likely that only gas-fired power plants will be successful in these auctions. The additional capacity is meant to guarantee supply security as the country rapidly builds out wind and solar power and exits coal – as part of its efforts to build a climate-neutral society by 2045. Successful bidders receive remuneration for having electricity available once a facility is built, providing the financial incentive needed to invest in the first place.Germany has decided that gas-fired units will play a major role during a transitional period, to later be converted to run on green hydrogen. All new gas-fired power plants bidding for a 15-year capacity contract must be hydrogen-ready, so they can switch in due course.Flexibility options such as large-scale batteries or demand management will also play a role in later auctions. The government also plans to introduce a capacity market by 2027 to ensure supply security from 2032, beyond the earlier auctions. This future mechanism is outside the scope of today's decision, the Commission said, adding that it “is an important part of the package for delivering the investor certainty needed for security of supply.”The Commission said the initial plans it approved today amounted to estimated costs of between 15.6 billion and 35.2 billion euros for the German state. The energy industry said that the plans to build new and flexible electricity generation capacity are crucial to support a renewables-based system in the future, and that speed was of the essence. “It is now important that the Federal Network Agency swiftly awards the contracts [in the tenders] so that work on the projects can begin without delay,” said Kerstin Andreae, head of the German Association of Energy and Water Industries (BDEW). Ingbert Liebing, managing director of local utility association VKU, said that regional electricity providers would also enter the auctions, and called for “a fair and non-discriminatory process” to ensure they stood a chance against major energy companies. Environmental Action Germany (DUH) said that there continue to be “serious doubts” as to whether the German framework is compatible with the requirements of state aid rules regarding technological neutrality, because the first round of tenders effectively excludes battery storage. The organisation said it would look into the Commission decision and consider “further legal steps.” Renewable electricity provider Octopus Energy also criticised that battery storage solutions and more flexible electricity consumption would not play a role initially. “It is frustrating that the Commission has missed the opportunity to allow for greater competition between gas-fired power stations and renewable alternatives,” said German CEO Bastian Gierull. “We could have achieved security of supply more cheaply.” The company sells contracts with dynamic electricity tariffs that support the transition to electric vehicles (EVs) and heat pumps.
EU approves state aid for new gas-fired power plants in Germany
The European Commission has given the green light (2 September) for Germany’s plans to provide state support for new backup power plants and electricity storage meant to secure electricity supply from 2031 – at times when intermittent wind and solar energy is insufficient to meet demand.The green light from the Commission is the last formal step needed to implement the auctions in Germany, economy minister Katherina Reiche said. The new law to ensure supply security would now “provide greater certainty for planning and investment, thereby ensuring a more reliable and, in the long term, more affordable electricity supply,” she said. Environmental NGOs criticised the EU approval. Advocacy group Beyond Fossil Fuels warned that Germany would lock in its reliance on fossil fuels, arguing that the energy crisis had exposed the risks of depending on global gas prices. “The German economy will remain strapped into the fossil-fuel rollercoaster for longer and Germans will be punished with price shocks and hefty electricity bills,” senior campaigner Alexandru Mustață said.Germany launched the first auction for government support in July, with a second round to follow in November. Both are aimed at so-called "long-term capacity", which is capable of supplying electricity continuously over an extended period, ensuring that even prolonged periods without sufficient renewable energy generation can be covered. It is likely that only gas-fired power plants will be successful in these auctions. The additional capacity is meant to guarantee supply security as the country rapidly builds out wind and solar power and exits coal – as part of its efforts to build a climate-neutral society by 2045. Successful bidders receive remuneration for having electricity available once a facility is built, providing the financial incentive needed to invest in the first place.Germany has decided that gas-fired units will play a major role during a transitional period, to later be converted to run on green hydrogen. All new gas-fired power plants bidding for a 15-year capacity contract must be hydrogen-ready, so they can switch in due course.Flexibility options such as large-scale batteries or demand management will also play a role in later auctions. The government also plans to introduce a capacity market by 2027 to ensure supply security from 2032, beyond the earlier auctions. This future mechanism is outside the scope of today's decision, the Commission said, adding that it “is an important part of the package for delivering the investor certainty needed for security of supply.”The Commission said the initial plans it approved today amounted to estimated costs of between 15.6 billion and 35.2 billion euros for the German state. The energy industry said that the plans to build new and flexible electricity generation capacity are crucial to support a renewables-based system in the future, and that speed was of the essence. “It is now important that the Federal Network Agency swiftly awards the contracts [in the tenders] so that work on the projects can begin without delay,” said Kerstin Andreae, head of the German Association of Energy and Water Industries (BDEW). Ingbert Liebing, managing director of local utility association VKU, said that regional electricity providers would also enter the auctions, and called for “a fair and non-discriminatory process” to ensure they stood a chance against major energy companies. Environmental Action Germany (DUH) said that there continue to be “serious doubts” as to whether the German framework is compatible with the requirements of state aid rules regarding technological neutrality, because the first round of tenders effectively excludes battery storage. The organisation said it would look into the Commission decision and consider “further legal steps.” Renewable electricity provider Octopus Energy also criticised that battery storage solutions and more flexible electricity consumption would not play a role initially. “It is frustrating that the Commission has missed the opportunity to allow for greater competition between gas-fired power stations and renewable alternatives,” said German CEO Bastian Gierull. “We could have achieved security of supply more cheaply.” The company sells contracts with dynamic electricity tariffs that support the transition to electric vehicles (EVs) and heat pumps.
