German plans for new gas plant tenders slip into 2025 as details remain unclear

Details on how to support the construction of 10 GW of new hydrogen-ready gas-fired power plants in Germany required by 2030 remain unclear and contentious, with the planned first tender unlikely this year, according to political decision makers and developers speaking at the BDEW energy congress in Berlin on June 6.

Energy minister Robert Habeck, speaking on a panel, said a political framework decision on the "power plant strategy(opens in a new tab)" within the governing coalition was still possible before the summer break.

This would allow a "power plant support law" to proceed towards parliamentary approval before the end of the year, the minister said.

"One press release and two background papers [from February] is all we know at the moment [about the details of the power plant strategy]," said lawmaker Jens Spahn, deputy head of Germany's main opposition CDU/CSU party.

He criticized a lack of consensus building for such an important task, noting internal coalition disagreements and a failure to involve the opposition or German states on the subject.

Regulator BNetzA meanwhile sees a first tender this year -- which Habeck in April said he was still hoping for -- as unlikely to happen.

"I think it [the political process] will go fast, but that doesn't mean that we will have a tender this year," said BNetzA vice president Barbie Kornelia Haller during a panel debate with Spahn as well as grid operators and turbine developers.

"We want stable long-term framework conditions. Once we have this in a parliamentary process, we [BNetzA] will start the tender call details. That needs to be prepared properly. We will work very hard so that this will come early next year," Haller said.

BNetzA is to organize the four planned tenders for support to build a total 10 GW new dispatchable capacity as well as a new capacity market from 2028 that was agreed in February by the government.

Brussels approval hurdles

Habeck said that approval by the European Commission of the planned state aid to build new power plants remained a hurdle, despite daily calls with Brussels to find a solution.

The minister explained that it was regulatory hurdles under EU state aid rules rather than securing approval for decarbonization measures that was the issue, as he sought to counter criticism of the slow progress against looming coal exit dates.

Habeck also referred to differences in assessing the missing dispatchable capacity in the early 2030s under current coal and lignite exit laws.

"That is not a big capacity gap in the early 2030s, we won't reach 10 GW," Habeck said, trying to explain the issue of getting the state aid for power plants approved by the EC.

Opposition politician Spahn meanwhile even called into question whether a 2038 coal exit was achievable.

"As things are developing, [Germany] will continue to use coal, have coal plants online beyond 2030 perhaps even beyond 2038; it is remarkable that a green energy minister may take that risk," Spahn said.

BNetzA's Haller said system operators had already contracted 18 coal units as reserves until 2031.

Capacity market

Another source of uncertainty is new government plans for a capacity market from 2028 that will help with plants getting tendered over the coming years, and its interplay in terms of state aid.

Details about the design of Germany's capacity market are patchy.

Habeck said in April that publication of an "options paper" based on a stakeholder consultation (PKNS) was expected soon to allow for implementation of reforms in 2024 or 2025.

The PKNS report recommended four options: competitive electricity market, capacity hedging mechanism through peak price hedging, decentralized capacity market and central capacity market as well as hybrid formats.

Developers of new gas-fired power plants such as RWE and EnBW require support as they would only be needed during periods of low wind and solar in the next two decades.

Analysts at S&P Global Commodity Insights only expect an average 1 GW coal and lignite generation in 2030, falling to almost zero by 2035, according to a long-term report in May.

German gas-fired generation is forecast to average 12 GW in 2030 and 6 GW in 2035 amid a rapid decarbonization of Germany's power sector dominated by renewables.

RWE is planning to build two 800-MW hydrogen-ready gas-fired power plants at an existing sites in the state of North-Rhine Westphalia (Gersteinwerk at Werne and Weisweiler in its Rhenish lignite mining area).

However, a final investment decision can only be made once framework conditions allowing for a commercially viable operation are in place, it said.

EnBW, which under a previous support program is building three coal-to-gas switch projects in Baden-Wuerttemberg, also plans further projects.

New CEO Georg Stamatelopoulus, speaking on the same panel as Habeck, called for regional considerations for capacity market locations to help reduce overall system costs.