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New strategy agreed upon by traffic lights: The intense battle for the four power plants begins now

After a long period, the traffic lights have agreed on a redesign of the power supply in Germany: the power plant strategy. Four new gas power plants, each with 2.5 gigawatts, which will be operated with hydrogen at some point between 2035 and 2040, are intended to be available in the future as “backups” to secure the electricity generation from renewable energies such as wind and solar – at the lowest possible cost to electricity customers. The new power plants are intended to replace environmentally harmful coal-fired power plants.

While those power plants are considered an important building block of the energy transition, energy companies are hesitant to invest because the new power plants are not easily profitable. That’s why the coalition had been negotiating a new strategy for a long time. The FDP especially insisted on low costs.

How the power plant strategy is supposed to work – and be financed

Investment and operating costs for the gas power plants are supposed to be promoted. Hydrogen is currently much more expensive than natural gas. Not only “green” hydrogen from renewable energies should be promoted, but also “gray” hydrogen, which is produced from fossil fuels. Sources from the government said that they expect costs of around 15 to 20 billion by the early 2040s. This is “absolutely feasible” through the climate and transformation fund (KTF). The federal government will tender the power plant capacities – the companies requiring the least subsidies will be awarded the contracts.

However, the construction of the new gas power plants is intended to be a temporary solution for now. From no later than 2028, a capacity mechanism is to be in place, which should be “technology-neutral”. Such a capacity market is a change of course. Brussels must approve this. Specifically, this concerns a mechanism through which power plant operators are remunerated for ensuring that their power plants are always ready for operation and can jump in when needed – so that they can also earn money during times when they are not producing electricity.

The intense battle for the four power plants begins now

It is clear: the energy industry has long been awaiting a strategy for new gas power plants, the construction of which will take several years. Several energy companies are already in the starting blocks and announced shortly after the publication of the strategy that they intend to apply for tenders.

The energy giant Uniper expressed satisfaction with the power plant strategy – and is confident that it will get a piece of the pie. Because Uniper CEO Michael Lewis expects his company to build a part of the new capacities for Germany. “We are very relieved that the federal government has agreed on a common approach to the power plant strategy,” said the manager. “Once we have been able to review the details, we will decide whether and with which investments we will participate.” In January, Lewis had said that Uniper intended to build three to four gigawatts.

RWE, the energy company, also reaffirmed its interest in building hydrogen-capable gas power plants. “RWE plans to participate in the tenders,” the company announced on Monday. The immediately planned tenders for power plants with a total of ten gigawatts are the right bridging solution, a spokesperson said. However, the details are important and the tenders should take place as soon as possible. According to earlier statements, RWE intends to build at least three gigawatts of capacity in Germany by 2030, mainly at its own coal-fired power plant sites.

A spokesperson for the energy company Steag described the key points as an important step. However, it was still unclear.pass away legal agreement with the EU as well as consulting a broader public. The Steag subsidiary Iqony plans to utilize its power plant locations for the construction of hydrogen-capable gas-fired power plants. As per earlier statements, the company can rapidly realize new capacities at three locations with a total output of approximately two gigawatts.

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New power plants primarily in the south?

The Karlsruhe-based energy company EnBW and network operator TransnetBW criticize the power plant strategy. They deem the envisioned power plant capacity of ten gigawatts to be inadequate. Consequently, the companies urge for immediate clarity on the strategy’s details.

“We clearly advocate for a regional component to ensure security of supply, particularly in the southwest,” demands EnBW board member Georg Stamatelopoulos. EnBW sees a need for improvement in the proposed 10 GW capacity, as per Stamatelopoulos, deeming it insufficient for an early implementation of the coal phase-out by 2030. “It is all the more important that the tenders start later this year, as the individual projects require six to eight years for implementation.”

Background: The new gas-fired power plants are intended to be located at “system-supportive” sites, meaning that the installations could be built where they can best contribute to the security of supply. Consequently, experts from politics and business primarily advocate for the construction of the new gas-fired power plants in Bavaria and Baden-Württemberg.

TransnetBW CEO Werner Götz expressed similar sentiments: “Hence, it is all the more crucial that the currently aimed four times 2.5 GW quickly materialize at the right locations, primarily in the south.” TransnetBW intends to provide incentives for the construction of new power plants by offering a specific remuneration based on forecasts for the operation of the facilities.

Baden-Württemberg’s Minister of Energy, Thekla Walker, also calls for swift details and a focus on southern Germany. “We now urgently need clarity on the exact funding conditions,” said the Green Party politician. “A significant portion of the new power plant capacities must be located in the energy-intensive south.”

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