Power Plant Tender: A First Step on a Long Road

The Federal Network Agency has published the results of the first tender for long-term capacity under the StromVKG. The round was significantly oversubscribed. Dr. Timm Kehler, Chair of the Board of the Association of the Gas and Hydrogen Industry, sees this as an important signal for security of electricity supply, but also as the beginning of a long journey:

“The strong participation in the first tender is an encouraging signal. It shows that investors are ready to bring new capacity online. Following the phase-out of nuclear and coal power, Germany needs dispatchable capacity in the form of gas-fired power plants to bridge periods of low wind and solar generation, such as those seen again over the past few days.

But this is only a beginning. Considerable technical and regulatory hurdles still need to be overcome before the projects awarded contracts become efficient gas-fired power plants that can deliver electricity reliably and at low cost, and can be converted to run on hydrogen. It is therefore crucial that the projects awarded contracts now lead to actual investment—and that their future use of hydrogen is factored in from the outset.

The first round marks an important start, but the need for firm capacity is still far from being met. In its security-of-supply report, the Federal Network Agency estimates that at least 22 GW will be needed by 2035. For the next tender rounds, the focus must be on efficient technologies. These include highly efficient combined-cycle gas power plants, battery storage, and hydrogen-ready gas engines. At the same time, hydrogen deployment must gather pace so that the power plants’ technical ability to use hydrogen can translate into an economically viable prospect.”