EU approves state aid for new gas-fired power plants in Germany

The European Commission has given the green light 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.

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.