EIt should actually have been ready months ago: the federal government's power plant strategy. It is considered a prerequisite for Germany to be able to phase out coal after nuclear power. “Ideally,” this should happen as early as 2030, according to the traffic light coalition’s goal. Another target is that electricity generation should be climate-neutral by 2035. But because wind and sun do not always provide reliable electricity, Germany needs power plants that run on hydrogen in a climate-friendly manner. However, since these are only used during periods of calm, they are not worthwhile for energy suppliers. The federal government and taxpayers must help. Since Monday, there has been more clarity about how.
The first thing that strikes you about the federal government's power plant strategy is that it is no longer nearly as powerful as was suggested last year. At that time there was talk of 50 new power plants with a combined capacity of 25 gigawatts being built. Estimated costs: up to 60 billion euros. But the budget debate following the Federal Constitutional Court's ruling has shown that such sums can hardly be financed.
The power plant strategy was therefore divided into two parts: In a first step, power plant capacities of up to four times 2.5 gigawatts are to be put out to tender in the “short term”. These gas power plants are scheduled to be completely converted to hydrogen between 2035 and 2040. The federal government wants to donate 16 billion euros for this. In a second step, a so-called capacity market is to be developed by summer 2024. While energy suppliers are normally paid for the amount of electricity used, the capacity market rewards the capacity provided. The mechanism is scheduled to take effect in 2028.
Are the advertised capacities sufficient?
Even if the sum for the construction of the reserve power plants is now significantly lower, the financing of the 16 billion euros has not yet been secured. The money will come from the Climate and Transformation Fund (KTF). In the KTF's current economic plan, only 7.5 billion euros in commitment authorizations have been planned for the power plant strategy until 2041. The missing sum must now be found in further budget planning.
There are unanswered questions not only about financing, but also about whether the planned capacities are sufficient. The 10 gigawatts of power, the construction of which is now to be put out to tender, is much less than experts had expected. Last summer, Federal Minister of Economics Robert Habeck (Greens) spoke of putting at least 15 gigawatts out to tender. In addition, purely hydrogen-based sprinter or so-called hybrid power plants with a capacity of 8.8 gigawatts should be added by 2028. There is no longer any talk of that. Managing director Kerstin Andreae from the Federal Association of Energy and Water Industries (BDEW) praised: “More expensive hybrid and sprinter power plants are correctly being postponed in the strategy.”
Economy is skeptical
It also seems clear to the federal government that the planned capacities may not be sufficient. In its announcement on Monday, the Federal Ministry of Economics wrote of a “no regret quantity” of power plants that should now be implemented quickly – i.e. a quantity that will definitely not be regretted about being built. Exactly how much capacity is missing is controversial. Uniper boss Michael Lewis said in mid-January that there was a risk of a performance gap of up to 25 gigawatts by 2030. In 2022, the Federal Network Agency estimated, based on two reports, that an early phase-out of coal would require additional gas-fired power plants with a capacity of 17 to 21 gigawatts in 2030 would be missing.
Skepticism can be seen in the initial reactions of business to the strategy. Security of supply is not negotiable for companies, said the managing director of the German Chamber of Commerce and Industry (DIHK) Achim Dercks. “It should therefore be clear that existing power plants will only be switched off when new systems are sufficiently and reliably connected to the grid.”
The coal-fired power plants in the Rhenish Revier are scheduled to be taken offline as early as 2030; the future of the power plants in Lusatia is still open. But it is not just the installed controllable capacities that will decline in the coming years. The increasing spread of heat pumps and electric cars, together with the increasing demand for electricity from industry, is likely to result in increasing peak loads in the coming years.
Uniper “very relieved”
The federal government has now moved away from its focus on green hydrogen. This type of hydrogen is produced from renewable energies such as green electricity and, according to experts, will be scarce and correspondingly expensive in the future. Power plants that use blue hydrogen should now also be funded. This is made from fossil energy sources such as natural gas or coal, the resulting CO2 is separated and stored.
Uniper was “very relieved” that the federal government had agreed on a joint approach to the power plant strategy and was also in favor of the capacity mechanism in Germany from 2028. “Quick action is urgently needed because the process of approval and the actual construction of power plants and storage facilities will take several years,” said CEO Lewis on Monday. In a way, Lewis was praising his bosses. In the wake of the energy crisis, Uniper was nationalized in 2022.
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