Germany’s Expansion Plan for Gas Power Plants Still in Limbo

Petra Sorge
·2 min read

(Bloomberg) -- Germany’s plans to build new hydrogen-ready gas power stations remain stalled for now as a top government meeting ended without a decision.

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Negotiations will continue this week as Europe’s top economy — which switched off its remaining nuclear power plants last year — continues to phase out coal and is looking at new gas power plants to fill a massive power gap. An agreement is expected “soon,” a government spokesperson said on Wednesday, without giving any details.

The government is aiming for around 40 to 50 new power plants — 8.8 gigawatts for hydrogen and 15 gigawatts to initially run on natural gas before they can be connected to the hydrogen grid by 2035. That’s because renewables like wind and solar power are not available around the clock and the nation needs reliable back-up capacity.

Read more: Germany Faces $1 Trillion Challenge to Plug Massive Power Gap

The first tenders were expected to start last year but were delayed over European Commission concerns over subsidizing the prolonged use of fossil fuels. Later, the country’s budget crisis stalled progress.

Read more: RWE Says 2030 Coal Exit at Risk If No Gas Tenders by Next Year

On Tuesday, Chancellor Olaf Scholz met with his two coalition partners to finalize the plans. The meeting focused on the right mix of different types of units and their locations, according to the government spokesperson.

“Clarity on the regulation is needed now,” said Thorsten Kramer, chief executive of the country’s second largest lignite producer Lausitz Energie Bergbau AG, which plans to construct 3 gigawatts by 2030. “Nobody will build a power plant if the investment is not profitable.”

Figuring out how to finance the power plants is a major hurdle. Lawmakers have only approved €7.55 billion ($8.2 billion), whereas experts and the Economy Ministry had earlier estimated costs at €60 billion. To quickly ramp up these plants, Economy Minister Robert Habeck is looking at more government subsidies as well as lower operational costs.

“Without additional resources, it will be difficult to fund,” said Social Democrat lawmaker Markus Hümpfer, adding that he prefers additional funding costs not to percolate down to consumers.

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