Germany aims for gas power plant auctions before year-end

Auctions for new gas-fired power plants in Germany should be held before the end of this year, economy and energy minister Katherina Reiche has said. While the coalition government parties have agreed to install up to 20 gigawatts (GW) of new gas plant capacity, this will not be achieved "in one go," Reiche said, adding that a "first batch" of at least 5 GW should be put up for auction before the start of 2026.

The new plants are intended to provide backup capacity for renewable power amid the country’s coal phase-out. Reiche told a utility conference organised by industry lobby group BDEW that the government is in ongoing talks with the European Commission regarding state support, as the EU requires “comprehensive justifications” for the use of public money. She said that the Commission would likely ask Germany to introduce a capacity mechanism by 2028, as part of its plan to make sure the lights don’t go out during the energy transition (the Power Plant Security Act), before approving the auctions.

“We need flexibility, storage, and controllable capacity,” the minister said with a view to the next steps of Germany’s energy transition. In its coalition treaty, the government parties agreed a monitoring report to ensure greater cost efficiency and long-term supply security, by better gauging expected electricity demand and coordinating grid expansion with the build out of renewables. Industry group BDEW said it expects the report to be completed before September.

Reiche said that a small group of analysts rather than a broad commission would conduct the monitoring to get fast results. "Germany has to change course," said the minister from the conservative Christian Democratic Union (CDU), pointing to the unprecedented three-year period of zero or minimum economic growth. “Energy policy is much more than climate policy,” Reiche said, arguing that aspects such as competitiveness and social justice require more consideration. 

The utility lobby group BDEW welcomed that the minister aims for speedy gas plant auctions, but warned that the provision to later operate these same plants with hydrogen should not be forgotten. “Nobody is going to build a gas plant that is no longer economically viable in 20 years’ time,” said BDEW head Kerstin Andreae. She stressed that quick auctions could only be a first step, and that preparations for introducing a capacity market or mechanism had to follow suit.

With a view to the planned monitoring report, Andreae said the BDEW generally supported the idea to review the status quo but warned that this must not end up slowing the renewables rollout. “Price-reducing effects can only set in once there is a high share of renewables,” meaning the buildout should not be throttled, Andreae argued.