StromVKG: Security of Supply Finally Gains Market Value

Today, the German Bundestag is discussing the draft Electricity Supply Security and Capacity Act (StromVKG). With the planned capacity market and the envisaged tenders for new dispatchable generation capacity, the legislation sets an important course for security of supply, the coal phase-out and the further integration of renewable energies. Bengt Bergt, Head of Public Affairs at the Association of the Gas and Hydrogen Industry, comments:

“With the StromVKG, the Federal Government is finally acknowledging that security of supply has a market value of its own. This is the real prerequisite for the energy transition: anyone who wants to continue expanding renewables and reliably safeguard the coal phase-out needs dispatchable power plants that can also generate electricity when wind and sun are not sufficient.

The introduction of a capacity market and the planned tenders for dispatchable capacity are therefore a long-overdue step to incentivise investment in new flexible power plants, keep existing capacities in the system and provide the decisive impetus for the ramp-up of hydrogen. What matters now is that the tenders are designed swiftly and in a way that is attractive to investors. Those expected to build new power plants need clarity on when which capacities will be tendered, how secured capacity will be remunerated and under what conditions the later conversion to hydrogen can take place.

New hydrogen-ready gas-fired power plants secure the electricity supply while also opening the path towards a climate-neutral power system. For this pathway to work, however, H2-ready must not remain a mere promise. Power plants need access to suitable infrastructure, a consistent conversion logic, clear financing mechanisms and practical deadlines for switching to hydrogen. Only if grid expansion, hydrogen production and the power plant strategy are closely aligned can the capacity market safeguard security of supply, the coal phase-out and climate targets at the same time.”