Germany’s Federal Ministry for Economic Affairs and Energy (BMWE) has reached an agreement in principle with the European Commission on key points for the country’s power plant strategy. This clears a major hurdle. The new power plants are to be hydrogen-ready.
A tender for 12 GW of dispatchable capacity is to be launched this year. Of this, 10 GW must be able to provide output for a longer minimum duration. These are to be “for example, but not exclusively” modern gas-fired power plants. Federal Minister Katherina Reiche now speaks of a “technology-neutral capacity market” intended to incentivise the addition of “further power plants and other flexible capacities.”
The capacities to be tendered this year are to come online by 2031 at the latest. Further tenders for dispatchable capacity are to follow in 2027 and 2029/2030. These tenders are also to be open to existing plants. Whether the tenders will total the capacity of just over 20 GW initially mentioned by the BMWE remains unclear at this point.
All power plants built under the power plant strategy are to be hydrogen-capable and fully decarbonise by 2045 at the latest. Additional measures are to be introduced to incentivise early switching to hydrogen at all power plants. The target is to convert the first 2 GW by 2040 and a further 2 GW by 2043. The instrument for this is to be contracts for difference, which are to be tendered from 2027. A legal framework for this still needs to be established.
The EU’s involvement is due to the strict regulation of state aid under EU competition law. Even with this agreement, the state aid procedure is not yet complete. The ball is now back in the Ministry’s court to draft a new version of the legislation. Once the law is passed by the Bundestag, Germany’s federal parliament, official state aid approval can be granted. A legally sound tender can then be launched.
The German Association of Energy and Water Industries (BDEW) welcomes the agreement. Kerstin Andreae, Chair of the BDEW Executive Board, praised the key points: “It is a positive step that technology-neutral tenders for new and existing plants in 2027 and 2029 for the target year 2031 will be introduced alongside the tenders for new plants in 2026. These address the total demand for dispatchable capacity for 2031.”
Incentivising the switch to hydrogen for gas-fired power plants through separate tenders from 2027 is also seen as a sensible approach. This reduces the investment risk that a fixed hydrogen conversion date would pose for companies. The BMWE must now act quickly so that the legislation can pass through parliament by summer if possible.
