Germany plans to sweeten the terms for its gas-fired power plant auctions by extending the maximum contract duration for state-backed revenue to 15 years, up from the previous proposal of 10 years. This change, outlined in a draft power plan seen by Bloomberg, is a response to concerns from potential investors who found the initial terms insufficient. The longer contract periods are designed to make investments in these new plants more attractive, addressing fears that the plants would not be profitable enough under shorter state support.
The revised plan aims to incentivize the construction of 10 gigawatts (GW) of new gas-fired power plants. These plants are intended to serve as a backup for Germany's expanding renewable energy capacity, ensuring grid stability when solar and wind power generation is low. The plants are also required to be "hydrogen-ready," meaning they must be convertible to run on 100% green hydrogen by 2035 at the latest.
While the first auction for 7 GW of new capacity is still scheduled for August, the new draft framework will not be approved by the German cabinet until later in July. The auctions are crucial for Germany's energy transition strategy, which involves phasing out coal power by 2030 and expanding renewable sources. The economic viability of these backup plants, which are expected to operate only occasionally, hinges on sufficient state support to cover their operational and investment costs.
However, the plan has drawn criticism from environmental groups, who argue it risks prolonging Germany's reliance on fossil fuels. They contend that the lengthy state support for gas plants could lock in emissions and divert investment from truly climate-neutral solutions. Despite these concerns, the German government views these gas plants as an essential transitional technology to guarantee energy security during the shift to a fully renewable energy system.
