09 Jul 2024, 13:13
Jennifer Collins

Germany plans new electricity levy to fund 'H2-ready' gas power plant fleet – media report

Frankfurter Allgemeine Zeitung / Tagesspiegel Background

Germany's government is planning a new levy for electricity consumers to fund the construction of the country's planned fleet of 'H2-ready' gas fired-power plants as part of its forthcoming Power Planet Safety Act (Kraftwerkssicherheitsgesetz), the Frankfurter Allgemeine Zeitung (FAZ) reported. It's unclear how much the new levy will cost consumers but the newspaper cites sources saying it will likely be minimal and become integrated into an existing charge for combined heat and power. Taxes, levies and surcharges currently make up 27 percent of household electricity costs, the FAZ added. The charge should help finance around 10 new gas-fired power plants with a capacity of 5 gigawatts (GW) that must be ready or convertible to run on hydrogen. These are intended to secure electricity supply when the sun isn't shining and the wind isn't blowing. 

The government is planning to provide a total of 12.5 GW of capacity, initially run on gas, and then on "CO2-neutral green or blue hydrogen". This falls far short of the 21 GW the country’s Federal Network Agency (BNetzA) says are required, but Green Party economy minister Robert Habeck said additional supply could come from coal plants on stand-by after 2030, writes FAZ. Some of the 12.5 GW capacity will be funded through tenders for hydrogen-ready gas plants that are scheduled to start by the end of 2024 or beginning of 2025. According to the article, the German government regards the levy as a bridge to capacity markets.  

The German government wants to publish a roadmap for a planned capacity mechanism by October and present it to the European Commission in the first half of 2025, writes Tagesspiegel Background. The mechanism is intended to ensure security of electricity supply, and should be in place by 2028. Power plants in a capacity mechanism get paid for standing at the ready, instead of for the power the actually produce. Under the regime, operators would receive bonuses to provide secure capacity for times of little wind or sunshine with various supplies from more predictable hydropower plants to bioenergy plants competing against each other.

Policymakers from coal mining regions and energy representatives have urged the German government since the end of 2023 to make fast progress regarding the aim to install sufficient backup capacity for the country. Otherwise, the country's aim to end coal-fired power production in the early 2030s and the smooth transitioning towards an energy system based on renewable power sources could be put at risk, they warned.

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