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EU poses “obstacle” to German gas plant tenders – industry

31 Aug 2023 11:57

31 Aug 2023 11:57

(Montel) Germany’s plans to roll out hydrogen-compatible gas plants from 2030 are being delayed by the pace of coordination with the European Commission, industry and local authorities told an energy gathering in Cologne on Wednesday.

Germany’s federal network regulator BNA has recommended building 21 GW of flexible capacity by 2031 to provide the backup needed to offset the country’s phaseout of coal-fired generation. 

Designing auctions to roll out such gas plants in a way that satisfied EU rules was proving to be one of the biggest “obstacles” to Germany’s energy transition, said Kerstin Andreae, head of the BDEW energy industry association, at a conference organised by municipal utility RheinEnergie. 

“This design is held up in Brussels,” Andreae said. “At the moment, I do not see the expansion we need. And we need many, many gigawatts.”

The German government was supposed to announce a power plant strategy in the first half of the year that would encompass a vision for how to acquire this fleet, but its publication has been delayed pending discussions with the EC. 

Awaiting strategy

“We would have liked to have seen this resolved this year,” said Michael Gessner, a departmental head of the state of North Rhine Westphalia’s energy ministry. “It looks like this will need to wait until next year.” 

Coordination was bogged down over questions of state aid due to the subsidies needed to build and retain gas-fired plants capable of increasingly using clean-burning hydrogen from the next decade, Andreae said.

“These plants need to be financed, but they are also supposed to run as little as possible, because renewables are supposed to run as much as possible. But if they rarely operate, they do not generate enough of a return – and that brings us back to the discussion of a capacity market,” she added.

The previous German government eschewed a capacity market, which subsidises power plants for lying idle until they are needed. Other European governments to have adopted them have had to coordinate their rules with the EC. 

“The clock is ticking,” said Gessner, pointing to a history of gas plants typically requiring 5-7 years to be brought online.

“Our most urgent appeal to the federal government would be to reach agreement with the European Commission as soon as possible. The federal government has already made many concessions.” 

US “more pragmatic”

Gessner’s state – Germany’s most populous – is home to numerous energy-intensive industries under immense pressure from high energy prices and desperate for clarity on their long-term prospects. 

“I don’t blame the staff of the commission personally, but things are moving too slowly,” Andreas Feicht, the head of RheinEnergie, told Montel on the sidelines of the gathering. 

The US was overtaking Europe in efforts to roll out hydrogen infrastructure, despite having started later, said Feicht, himself a former undersecretary in Germany’s economy ministry. 

He attributed this to a more “pragmatic” approach of providing tax credits rather than bureaucratic subsidies that had to negotiate EU competition rules. 

“My biggest concern is we are getting too politically attached to individual deadlines. For me, the action is more important than the question of when precisely something is achieved.”

Germany’s green-led economy ministry hopes to bring forward a coal exit to the end of the decade compared with 2038 under the previous administration.

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