Utilities still doubtful there will be investors for Germany's H2-ready power plants

Germany's energy industry has warned that the country might struggle to find investors to build new hydrogen-ready gas power plants, following the end of a three-day consultation period on the latest draft of a law setting funding conditions. With its Power Plant Security Act, the economy ministry aims to set the framework conditions to ensure that these plants get built in the near future, as they are considered as necessary back-up capacity amid the phase-out of coal power generation and the further expansion of renewable power sources.

However, utilities said the latest draft was unfavourable to investment, uneconomical and detrimental to renewables, Tagesspiegel Background reported. At the moment, the "high risks and the threat of consequences" if operators fail to meet requirements for the use of hydrogen "are preventing bankability," energy industry association BDEW said in a statement. If subsidised 'H2-ready' power plants did not operate on hydrogen within the specified period, a full repayment of the funding or withholding of the security deposit would be due, BDEW said. However, there were too many uncertainties around the availability of the synthetic gas produed with renewable power and timeline around hydrogen pipeline network development to ensure that deadlines in the act could be met, the association added.

The local utilities association (VKU) was critical that previous feedback to allow existing gas-fired power plant sites to apply for funding was excluded from the draft again. "This is economically inefficient and prevents genuine cost competition in the tenders," VKU said in a statement, adding that locations with existing infrastructure were particularly suitable. "Unfortunately, the modernisation of existing plants also plays virtually no role in the draft."

Renewables industry association BEE called for controllable renewables, such as biogas, as well as storage and consumer flexibility to be taken into account more strongly. The act "must be turned on its head," said BEE head Simone Peter. "Power plant security must be harmonised with the urgent need for flexibility and therefore designed as a flexibility security law."

Germany aims to build many gigawatts (GW) of H2-ready gas power plants to stabilise electricity supply in future when demand cannot be covered by renewables or storage. These plants are also seen as a perquisite for an earlier coal phase-out, ahead of the official 2038 deadline. As they take many years to build, the energy industry has repeatedly called for the government to hold the tenders quickly. However, it is unlikely that Germany's current minority government can pass the law in parliament, as it would require support from the opposition. A full cabinet decision on the law draft is set for 4 December.