German government adopts power plant strategy

It took a long time, but now it’s here – the power plant strategy (Kraftwerkstrategie) for Germany. It should actually have been available at the beginning of 2023, but the political agreement process was difficult and correspondingly time-consuming. On February 5, 2024, the strategy was presented, but it still has to be coordinated with Brussels and publicized. It is to create the framework for new investments in modern, highly flexible and climate-friendly hydrogen-capable power plants. Details on the future electricity market design will then be available in the summer – if the Ampel coalition leading the government reaches an agreement on that.

The aim of the power plant strategy is to ensure that the supply of electricity is “guaranteed climate-friendly, even in times with little sun and wind,” so that it can “make an important contribution to system stability.” A basic prerequisite for this, however, is that the expansion of renewable energies and the power grid is promoted so that decarbonization can advance.

To achieve this, German chancellor Olaf Scholz, economy minister Robert Habeck and finance minister Christian Lindner agreed on some essential elements. For example, an early expansion of power plants is to be encouraged. The tenders as part of the power plant strategy will be designed in such a way that the new power plants are fully integrated into the future capacity mechanism.

“The power plant strategy describes how we will bring new types of power plants that are hydrogen-capable onto the market.”

Robert Habeck, German minister for economy and climate protection

For it, soon new capacities (natural gas-fired power plants that are H₂-ready and are located at system-serving sites) of 10 GW total will be put out to tender. Habeck had previously targeted more than twice as much. By 2040 at the latest, these are to be completely converted from natural gas to hydrogen. Power plants that run exclusively on hydrogen will be funded up to 500 MW as part of energy research. The funding required for this is to come from the climate and transformation fund (Klima- und Transformationsfonds). In addition, work on a future electricity market design is to be further advanced.

Existing barriers to the construction and operation of electrolyzers are to be removed. In addition, every opportunity should be taken to accelerate especially the expansion of electrolyzers that serve the German energy system. In addition, double charges in the form of levies and fees that are currently incurred when operating electrolyzers are to be eliminated. Specifically, it says (translated): “The use of surplus electricity shall be made possible without restriction; all existing regulatory hurdles shall be removed as far as possible.”

Criticism from the DWV

Initial reactions from the energy sector were generally positive. The DWV (German hydrogen and fuel cell association) expressly welcomed the fact that the German government has now agreed on key elements of a power plant strategy, as time is running out. At the same time, however, the chairman Werner Diwald criticized: “In the analysis of the BMWK (German economy ministry), it says that by 2030, over 23 GW of gas-fired power plants that can run on hydrogen are required to secure the electricity supply. The question therefore arises as to why in the key points agreement on the power plant strategy only a total of 10.5 GW of power plant capacity is to be put out to tender.” The DWV calls for the tendering of the long-announced 8.8 GW in the form of hybrid and “sprinter” power plants (generate electricity from renewable hydrogen as soon as the plant is in operation) as well as a further 15 GW of future-proof H₂ power plant capacity to be put out to tender over the next three years. For the DVGW (German association for gas and water standards) as well, the capacity now targeted is “at best a first step.”

“By 2030, 80 percent of the electricity consumed in Germany is to come from renewable energies.”

BMWK