13 March 2024:

In February, the German government reached an agreement on the Power Plant Strategy with the aim of creating state support mechanisms for newly built gas power plants. Nearly €44 billion in subsidies are set to support the cause of ensuring that enough electricity is generated “when there is little sun and wind,” as officials have stated. 

However, it is greatly disappointing to see that sustainable, green, and readily available solutions to provide flexibility for renewable energies are greatly overlooked here. Instead of prioritising the expansion of renewable energies supported by energy storage, Germany is prolonging its reliance on fossil fuels. 

One of the primary justifications for this decision is the anticipation that by 2040, fossil gas power plants will be converted to utilise clean-burning hydrogen gas sourced from renewable sources. Yet, there is a question as to whether constructing large new gas plants initially, only to later convert them to green hydrogen, is economically and ecologically the correct approach.

The agreement also includes the creation of a technology-neutral capacity mechanism, expected to become operational by 2028. Capacity mechanisms can incentivise the deployment of energy storage systems to ensure grid reliability, especially during peak demand periods or in regions with intermittent renewable energy sources. The German government’s communication did not provide details on the design of the capacity mechanism. 

We would like to highlight that to promote net-zero technologies, new capacity mechanisms should prioritise financing non-fossil solutions such as flow battery energy storage and allow various providers, ranging from large corporations to fairly small entities including citizens’ energy cooperatives, to compete. It is expected that the German government will have more concrete proposals by Summer 2024. 

In the next steps, this Plan needs to be discussed with the European Commission, which is the guardian of State aid compliance with EU rules, followed by a public consultation. 

We urge German and European institutions to shift direction and invest in a variety of non-fossil assets while staying compliant with reaching Green Deal goals and the Energy Storage Strategy. 

The communication from the Federal Ministry for Economic Affairs and Climate Action can be found here