German Government reaches general agreement on power plant strategy with the European Commission
Author of this post is Paula Friederike Linden.
On 15 January 2026, the German Federal Government reached a general agreement with the European Commission on crucial elements of the long-awaited power plant strategy. The strategy’s essential framework for implementing the proposed measures to secure electricity supply in Germany is based on the found agreement compliant with European state aid law. In the light of this agreement, the power plant strategy can now be further developed into a corresponding legislative act.
Based on the agreement reached with the European Commission, first, a total of twelve gigawatts (GW) of new controllable capacities shall be put out to tender in 2026. In this tender, a so-called long-term criterion is to be envisaged for ten gigawatts.
Capacities that are awarded contracts in this tender shall generate electricity over a longer, yet undefined period of time to ensure their contribution to security of supply. The long-term capacities, which will in particular include modern, highly efficient gas-fired power plants, shall be put into operation by 2031 at the latest. In addition, further controllable capacities shall be subsidised in 2027 and 2029/2030 through technology-neutral tenders, with the tender volume to be determined based on security of supply monitoring. These are to be commissioned by 2031 at the latest.
Contrary to the first round of tenders in 2026, these tenders will also be open to existing plants. The minimum capacity threshold for participation in the tender is still to be determined. This aspect is not covered by the agreement.
Promotion of hydrogen usage
In addition, it is intended that all power plants built as part of the strategy will be hydrogen-ready and achieve the target of complete decarbonisation by 2045 at the latest. However, the government does not intend to set a generally binding date for the switch to hydrogen. This constitutes a significant difference from the initial plans of the preceding government.
With regard to the decarbonisation target, additional tenders shall take place in order to create an incentive for two gigawatts of power plant capacity to be converted to hydrogen already by 2040 and a further two gigawatts by 2043. The tenders for the early conversion to hydrogen are scheduled to start in 2027. According to current plans, this will include the use of contracts for difference to cover the additional fuel costs of an early conversion to hydrogen as a fuel.
Results of the general agreement
Overall, the key points now agreed upon with the EU Commission fall short of the plans originally announced in the coalition agreement for installing new power plant capacities of up to 20 gigawatts. However, they correspond with the latest approaches regarding the power plant strategy outlined by the Federal Ministry for Economic Affairs and Energy: pragmatic as well as focused on security of supply and regional management. The Federal Ministry for Economic Affairs and Energy also emphasises that the power plant strategy is merely intended as a ‘starting point’ – from 2032 onwards, a technology-neutral capacity market shall ensure security of supply and compliance with climate protection targets. Under plans being considered, the capacity market shall be implemented in 2027.
Despite the general agreement that has been reached, the EU State aid procedure is mandatory. If the advertised draft law is adopted – based on the now found key points – it must be notified to the Commission and then be approved under EU State aid law.
