As part of the budget consultations for 2025 and the Growth initiative The German government has also agreed to introduce a new Power Plant Safety Act to plan. It is part of a comprehensive strategy to secure the electricity supply and is intended to help balance out the volatile energy generation of renewable energies. The focus is on the construction and modernization of power plants that can be converted to hydrogen in order to drive forward decarbonization.
Reasons for the Power Plant Safety Act
Germany must close the gap left by the Exit from the Coal-fired power generation is created. Although natural gas power plants are an alternative, they continue to cause CO₂ emissions and are therefore becoming increasingly unattractive economically. In addition, they will be needed less and less in future due to the growing proportion of renewable energies. For these reasons, hardly any commercially oriented companies are currently investing in such power plants as a bridging technology. The Power Plant Safety Act is intended to change this through tenders and subsidies.
Types and locations of the new power plants
The German government is focusing primarily on hydrogen power plants, which are powered by green hydrogen from renewable energies or blue hydrogen from natural gas, with the CO₂ being stored. Biomass power plants are also an option. Overall, the aim is to 12.5 GW new capacities will be created. Of these, 5 GW of H2-ready gas-fired power plants and 2 GW of modernizations will be put out to tender, which will be converted to hydrogen no later than eight years after commissioning. In addition, 0.5 GW of pure hydrogen power plants and 0.5 GW of storage facilities are planned. A further tender for 5 GW of gas-fired power plants will follow, which must be climate-neutral by 2045. The new plants are to be built primarily in southern Germany in order to ensure grid stability and reduce redispatch costs.
Financing and costs of the Power Plant Safety Act
A so-called capacity mechanism will be introduced to ensure subsequent financing. This mechanism is to take effect from 2028 and includes a Levy on the electricity price. The German government calculates costs for the entire funding period of around 20 billion euros. Part of the financing is to come from the Climate and Transformation Fund or the federal budget and the other part from the levy. According to expert estimates, the additional costs could increase the kilowatt hour of electricity by 0.5 to 1 cent more expensive.
General development of the electricity market
From 2028, the German government is planning to convert the electricity market from a pure remuneration system to a Capacity market. In this new model, remuneration is to be paid not only for the energy actually produced, but also for the provision of capacity, even if this is not used. In the UK, Belgium and Poland, pure energy capacities are already traded or auctioned in this form. The aim is to increase security of supply and stabilize the electricity grid, particularly at times when there is little wind and sun available.
Timeline for the Power Plant Safety Act
The first tender for plants is planned for late 2024 or early 2025. Following consultations and approvals, the first projects should start by 2026. In parallel, the BMWK is working on an options paper for the design of the capacity mechanism, which should be fully operational by 2028.