Germany is accelerating its shift toward natural gas as a backup power source to ensure grid stability amid the expansion of renewable energy. In the country's first capacity auction, gas-fired projects secured all 5.16 gigawatts (GW) of derated capacity, with energy giants RWE and LEAG dominating the awards. The auction results highlight how existing coal power plant sites provide a competitive edge, as these locations already have established infrastructure and grid connections.
The strict operating requirements, which mandated projects to deliver at least 80% of their installed capacity for 10 consecutive hours, favored gas generation and left battery storage projects without any awards. Despite the competitive bidding driving the average award price to about €155,000 per derated megawatt per year, 36% below the auction's price ceiling, the costs remain substantial compared to other European capacity auction benchmarks.
Future auctions may offer more opportunities for batteries and other energy storage technologies, depending on the design of the auction rules. Meanwhile, the winning gas plants include hydrogen-readiness requirements, which could open a potential market for hydrogen suppliers. However, the actual transition to hydrogen remains uncertain, as readiness does not guarantee its future consumption.