German govt to hold first tender for H2-ready gas plants by early 2025

The German government will hold the first round of tenders for hydrogen-ready gas fired power plants by the end of 2024 or beginning of 2025, the economy ministry (BMWK) has said following a government agreement on the country's budget plan for 2025. As part of its Power Plant Strategy, the government will put out 12.5 gigawatts (GW) of power plant capacity and 500 megawatts (MW) of long-term storage to tender. Power plants are to be built primarily in Germany's so-called "grid south" to reduce re-dispatch costs and contribute to grid stability, the economy ministry said. "We are making the electricity system fit for a high proportion of renewable energies and also securing ourselves for times when there is little wind and sun," economy minister Robert Habeck said.

The tendering process will be held in two separate auction rounds. In the first, 5 GW of new H2-ready gas power plants and 2 GW of H2-ready "modernisations" are to be put to tender. These plants must convert to running with green or blue hydrogen from the eighth year of their commissioning or modernisation. Additionally, there will be a tender for 500 MW for plants directly running on pure hydrogen and 500 MW of long-term storage. For the power plants, investment costs will be subsidised, as well as the difference between hydrogen and natural gas for 800 full utilisation hours per year.

The second round should ensure security of electricity supply during periods of little wind and sunshine. For this, a further 5 GW of gas-fired power plants will be auctioned. "These represent a kind of 'bridge' to a comprehensive, technology-neutral capacity mechanism, which is to be operational from 2028," the economy ministry wrote. It remained unclear whether this tender would also apply to non H2-ready gas power plants. The economy ministry did not reply to a Clean Energy Wire request for clarification by the time of publication.

Energy industry interest group BDEW said the long-awaited strategy must now be swiftly implemented. "Details of the tenders must be organised in such a way that hydrogen-capable power plants can be built as quickly as possible," BDEW wrote in a press release, calling this a perquisite for an early coal phase-out. Environmental group DUH also welcomed the strategy, but warned that it should not become "an economic stimulus programme for fossil gas-fired power plants" through the use of blue hydrogen (manufactured with natural gas in combination with carbon capture procedures, such as CCS).

The government said the agreement to hold tenders had been coordinated with the European Commission, which is still to give its final approval under state aid law. Germany's energy industry had been eagerly anticipating the strategy, warning that further delays could jeopardise the aim to phase out coal in the early 2030s. The legal deadline for the phase-out is 2038. The government initially planned to hold the first auctions in mid-2024. The back-up plants are necessary to complement intermittent renewable power production, which in the long run is supposed to happen purely with green hydrogen and power storage capacity, for example in industry-scale batteries.