European Commission approves German capacity mechanism of up to $40.8 billion to secure electricity supply
In Belgium, the European Commission said it has approved, under EU State aid rules, a capacity mechanism for Germany available from 2031. This measure, with an estimated cost between $18.07 billion and $40.8 billion, aims to ensure sufficient capacity to produce, store or flexibly consume electricity, so that electricity production can consistently meet expected demand.
The European body said that Germany notified to the Commission a measure to ensure security of electricity supply in 2031.
Under this market-wide mechanism, the transmission system operator remunerates all the capacity needed to meet the reliability standard, which is a standard to ensure adequate security of supply. The reliability standard has been established based on the recent European Resource Adequacy Assessment 2025 carried out by the Agency for the Cooperation of Energy Regulators.
This capacity mechanism will be open to all technologies (generation technologies, storage and demand response) and to both existing and new capacity, as well as to cross-border capacity. Contracts will be signed for up to 15 years. The capacities will be selected in competitive auctions, for delivery starting in 2031. All supported capacity benefitting from 15-year contracts will be required to operate in a climate-neutral way by 2045 at the latest. All new gas-fired power plants bidding for a 15-year capacity contract must be hydrogen-ready, so they can switch in due course.
The first auctions will be organized in 2026 and in 2027, if undersubscription occurs. They will be reserved for additional long-term capacity, based in Germany. The subsequent auctions, to be organized in 2027 and 2029, will be open to all technologies and to both existing and additional capacities. Germany will also implement decarbonization tenders to accelerate the decarbonization of part of its gas-fired capacity via a switch to hydrogen, helping to offset a possible lock-in of natural gas. Germany will provide support for the switch from gas to hydrogen, the commission said.
Category: Hydrogen
