The European Commission has approved a German “capacity mechanism” worth up to €35.2 billion to help secure electricity supplies from 2031.
The scheme is designed to ensure there is enough capacity to generate electricity, store it, or reduce demand when needed so supply can match expected consumption, the Commission said in a release on Wednesday.
A capacity mechanism is a system where providers are paid to make power available, even if they do not generate electricity all the time.
Germany’s plan will use competitive auctions to select capacity, with contracts lasting up to 15 years and delivery beginning in 2031.
The mechanism will be open to generation, storage and “demand response” — where large users agree to cut consumption at certain times — as well as both existing and new projects.
The Commission put the overall cost at between €15.6 billion and €35.2 billion, with annual costs estimated at €1 billion to €3 billion in 2031 and €0.9 billion to €2.3 billion a year from 2032 to 2045, depending on auction results.
All capacity awarded 15-year contracts will be required to operate in a climate-neutral way by 2045 at the latest, the Commission said.
It added that any new gas-fired power plants seeking a 15-year contract must be “hydrogen-ready”, meaning they can be converted to run on hydrogen in future.
Auctions start in 2026, with limited early rounds
The first auctions will be held in 2026, with a further auction in 2027 if the first round does not attract enough bids, according to the Commission.
Those early rounds will be reserved for additional long-term capacity located in Germany.
Later auctions planned for 2027 and 2029 will be open to all technologies and both existing and new capacity.
Apart from the initial tenders reserved for new capacity, the scheme will also be open to foreign capacity in EU countries that have a direct network connection with Germany.
The Commission said it approved the scheme under EU State aid rules, after finding it was needed to meet the objective of security of supply and that support would be awarded through a competitive process with safeguards to protect competition and cross-border trade.
