Energy companies propose new incentives for much-needed new gas power plants

German energy companies have called for the introduction of a new incentive mechanism to trigger the construction of new gas power plants, which the country plans to use as a back-up for renewable energy, reports business daily Handelsblatt. Transmission grid operator TransnetBW and the power plant operators Steag and GKM proposed a new-build advance in the form of guarantees for future payments for so called “redispatch” measures to stabilise the grid. This mechanism would ensure incentives to build power plants exactly where they are needed, and investors could include the payments in their financing calculations without a risk discount, according to a concept prepared by energy consultancy Enervis for the companies. 

The Federal Ministry of Economics is working on a power plant strategy to stimulate new construction, but so far details are unknown. Economy and climate minister Robert Habeck said earlier this year that Germany will use auctions to build new gas power plants with a total capacity of around 25 gigawatts by 2030 — which is equivalent to about 50 power station units. These plants would initially be powered by natural gas, and then convert to renewable hydrogen on Germany’s path to become climate neutral by 2045. But the energy industry has long warned that companies have little incentive to build them. The renewable energy industry warned last month that Germany must avoid creating an overcapacity of gas power plants.