Germany's €35bn Power Plan Comes With a Climate-Neutral Clause

The European Commission has approved a German electricity capacity mechanism worth up to €35.2 billion, but the detail that matters most for the clean energy transition sits in the small print: all supported capacity, including new gas-fired power stations, must be operating climate-neutrally by 2045.

The mechanism, expected to cost between €15.6 billion and €35.2 billion overall (around €1-3 billion in 2031 alone), is designed to guarantee Germany has enough electricity capacity available as coal and nuclear exit the system and wind and solar take a larger share. It is technology-neutral, open to power stations, battery storage and flexible demand alike, with competitive auctions beginning this year and supported capacity delivering from 2031. The first auctions are expected to secure around 9 GW of long-duration capacity, aimed at covering extended low-wind, low-sun periods sometimes called Dunkelflauten.

Gas will still play a role during the transition, but Germany is trying not to lock in fossil generation for decades. New gas-fired plants seeking 15-year contracts must be hydrogen-ready, and, more significantly, all supported capacity is required to reach climate neutrality by 2045 at the latest. That key condition means supported capacity must ultimately operate in a climate-neutral way, giving plants a built-in obligation to move toward hydrogen or another zero-carbon path over the life of their contract. Separate tenders will support converting 2 GW of gas capacity to hydrogen by 2040 and another 2 GW by 2043.

This approval covers the market-wide mechanism for 2031. Germany intends to introduce a further, larger "structural" capacity mechanism from 2027, covering supply security from 2032 onwards, which sits outside today's decision and will need its own approval in time.