Germany unveils bill to support gas-fired power plants

Germany's Federal Ministry for Economic Affairs and Climate Action has unveiled a draft bill to support the construction of new power plants. The government wants the legislation to ensure that enough power plants are built in the coming years to guarantee security of supply in the future when renewable energy generation is low. The ministry has now launched a consultation process.

Under the draft bill presented, the German ministry plans to support the construction of 7 GW of new gas-fired power plants or the modernization of gas-fired power plants, which are to be converted to run on hydrogen from their eighth year of operation. New projects will be given priority, accounting for at least 5 GW of the total.

A further 0.5 GW of hydrogen-fired power plants and 0.5 GW of long-term storage capacity are also to receive support. The government has now published key details of the planned legislation so interested parties can comment by mid-October.

"We are preparing the electricity system for a high share of renewable energy while also protecting ourselves against periods with little wind and sunshine," said Economy Minister Robert Habeck.

The first round of auctions for state support is scheduled for early 2025, and power plants awarded support must then be built within six years. Bids to build power plants in southern Germany will be favored in the auctions, so that two-thirds of the required installed capacity is allocated to the south.

“From the perspective of grid security and stability, as well as the costs of system integration, building new hydrogen-fired gas power plants at sites in southern Germany is particularly advantageous and necessary. System costs associated with bottlenecks in the electricity grid can be reduced by creating power generation capacity as far downstream of those bottlenecks as possible. However, this does not mean that new power plant capacity should be built only in southern Germany, since power plants in the north are also needed to ensure grid security and stability in the long term,” the draft bill states.

The ministry also presented another measure, called a “preliminary capacity market”, which is intended to support the construction of a further 5 GW of power plants without specifying a technology. Technical requirements for flexible and robust plant operation are intended to ensure that the plants also help stabilize the electricity system.

The capacity mechanism, which is due to be operational from 2028, is intended to guarantee investment in any additional power plants that may be needed.

The energy industry association BDEW welcomed the next step in the legislative process. "We need to make rapid progress here so that tenders and the actual construction [...] of power plants and long-term storage facilities can finally get underway," said BDEW head Kerstin Andreae. This is a prerequisite for a rapid phase-out of coal, BDEW added.