Energy industry voices doubts about timely launch of German Power Plant Strategy

Representatives of Germany’s energy industry have voiced doubts whether the government’s planned Power Plant Strategy, which is supposed to pave the way for the use of new hydrogen-ready gas power plants, will be drafted early enough to allow for auctions still in 2024, business newspaper Handelsblatt reported. “Whether there will be auctions this year at all is unclear,” Ingbert Liebing, head of local utility association VKU, told the newspaper. Companies that want to participate in the tenders for new plants need to know auctioning details well in advance to prepare their bids, Liebing said. “In order to attract enough bidders and keep energy supply resilient, the auction design must place a focus on regional dispersion and a plurality of actors,” he argued. Energy industry lobby group BDEW head Kerstin Andreae told Handelsblatt companies were “very impatiently” awaiting the go-ahead to start planning construction of back-up power plant capacity that is needed in the transition towards a power system based on renewable energy sources. “Financing questions need to be answered quickly, as well as questions pertaining to state support and the plants’ locations,” Andreae said. The economy ministry, meanwhile, said talks on the strategy were ongoing within the government and with the European Commission. “We cannot make any concrete statements about the auctions’ timetable at this point,” a ministry spokesperson told the newspaper. The first auctions for plants with a combined capacity of 10 gigawatts (GW) so far are expected to take place within the second half of 2024.

In a separate article by news magazine Der Spiegel, transmission grid operator TransnetBW urged the government to ensure an adequate allocation of new back-up plant capacity across the whole country. This would be needed to counter the uneven distribution of renewable power capacity. Capacity is greatest in northern and eastern Germany, where renewables routinely must be curtailed to avoid grid overload while fossil-powered plants need to fired up elsewhere. This procedure is known as redispatch and can cost more than one billion euros every year. The construction of hydrogen-ready gas plants in the west and south could be facilitated if the state provides funding guarantees to operators that match the expected redispatch costs for a limited period, the company argued. “This makes the cash flow secure and investors find better conditions,” which would help to achieve a more targeted distribution of the plants at lower total costs, TransnetBW said.

The German government had presented key points of its plans in February, but the full power plant strategy has yet to be presented. The government has been in talks with the European Commission over state support for its back-up power plants. The Commission has urged Germany for years to consider a split of its power pricing zone in a northern and a southern bidding area to better reflect the advantages of renewable power abundance in the north. This step is vehemently opposed by southern and western German states, where many of the country’s most important industrial companies are located, over fears that this will lead to higher local power prices. Natural gas plants that can be converted to operate with climate-friendly green hydrogen are supposed to fill gaps in Germany’s power system of the future at times of little wind and sunshine.