Germany could struggle to find investors for new gas power plants, utilities warn

Germany's plan to secure the supply of electricity at all times through hydrogen-ready gas power plants could not materialise fully as investment risks are too high, warned energy associations BDEW and VKU. In their respective position papers marking the end of the consultation period for Germany's Power Plant Security Act, the associations said there were too many risks and unanswered questions in the conditions for the planned auctions of the future plants, Tagesspiegel Background reported.

Germany is aiming to cover 80 percent of its electricity demand with renewables by 2030, and have a largely decarbonised power supply by 2035. To make sure the lights stay on at all times as the share of intermittent renewable energy increases and coal is phased out, the economy ministry presented the Power Plant Security Act (Kraftwerkssicherheitsgesetz, or KWS, in German). It includes a proposal for a capacity mechanism and auctions to support the construction of 12.5 gigawatts (GW) of new H2-ready gas-fired power plants and 0.5 GW of long-term storage capacity. The H2-ready plants would also form the basis for an earlier coal phase-out, ahead of the official deadline of 2038.

"In order to facilitate investment, fundamental points, such as maximum prices, enabling hybrid operation [using gas and hydrogen] and the level of penalties [for a failure to convert to hydrogen] must be revised," energy industry association BDEW said. According to utility association VKU, investors are faced with too many political, regulatory and authorisation risks, Tagesspiegel Background wrote. "It is questionable whether sufficient bids will be submitted for the decarbonisation pillar under the given conditions, because projects with this risk-opportunity profile are difficult or impossible to finance," the VKU statement said.

The economy ministry plans to hold the first round of tenders for hydrogen-ready gas fired power plants at the beginning of 2025.