Germany’s Capacity Market Clears EU Hurdle Six Days Before First Auction

The European Commission has approved Germany’s long-awaited capacity mechanism under EU state aid rules, clearing the way for the country to secure adequate electricity supply from 2031. The green light came after roughly three and a half years of negotiations — arriving just six days before the scheme’s opening auction, scheduled for September 8.

The mechanism can channel up to €35.2 billion toward three groups of participants: power generators, energy storage operators, and demand-response providers. Two additional tenders, each covering 4.5 GW, are also set for this year; those contracts are expected to flow mainly to new gas-fired plants designed to run on hydrogen in the future.

Resources needed from 2031 onward will be allocated through competitive auctions, with contracts lasting up to 15 years. All participants must achieve climate-neutral operation by 2045 at the latest, so new gas plants must be hydrogen-ready from the outset. Brussels confirmed the scheme stays open to all technologies, including existing assets and cross-border capacity.

On projected expenditure, the Commission puts the annual figure at somewhere between €1 billion and €3 billion for 2031, falling to a range of €900 million–€2.3 billion per year from 2032 through 2045.

Kerstin Andreae, chief executive of the German Energy and Water Industries Association, welcomed the timing, saying the approval arrived “just in time for the first application deadline” after lengthy negotiations and delays.

Germany’s Federal Network Agency must now move swiftly to finalise contracts. Broader long-term capacity auctions are planned for 2027–2029, with a wider, technology-neutral market framework targeted for 2032 onward.

Source: PV Magazine