German utilities doubt 25GW gas plant additions by 2030

Germany is unlikely to be able to add 25GW of new gas-fired capacity by 2030, several German utilities have told Argus.

Uniper assumes only around 20GW of new gas-fired capacity could be built by 2030, based on the framework for hydrogen-ready plant tenders outlined by the economic affairs and climate action ministry (BMWK) in August. And the utility highlighted that even 20GW was an "ambitious target" as it would assume additions of 3 GW/yr, and rates of new construction have tended to be in the 1-2 GW/yr range.

Steag said that under the given framework, plant operators are "unlikely" to put up large sums of money to build new gas-fired power plants as there is too little planning certainty. Vattenfall told Argus that fuel use itself should be supported to increase demand and ensure the ramp-up of hydrogen production and availability, which it said is "the only way" to keep prices at a "tolerable" level in the long term.

EnBW concurred on the lack of clarity, with more concrete information needed on the government's plans and particularly surrounding to what extent combined heat and power plants (CHPs) will be included in the tenders. Vattenfall also said that in order to achieve a rapid ramp up, the hydrogen "starter grid" should take CHPs into account.

The utilities generally agreed that both greater clarity around the specifics of the tenders and their timely implementation is essential, with Michael Muller, chief executive of RWE — which holds a dominant position in the German power market — particularly highlighting that the additions are "crucial" to enable a coal phase-out by 2030.

A total of 11.9GW of conventional capacity is expected to be decommissioned by 2025, and renewable additions have been consistently below the pace required to reach the country's 2030 targets, raising concerns about supply as the industry-heavy country tries to decarbonise.

BMWK estimates that demand will rise to around 750TWh by 2030, which the country's transmission system operators expect to see particularly in the demand-heavy southern and western areas of Germany. Southern utility EnBW said that the "decisive factor" for it is whether the specifics for southern Germany will be taken into account, as the demand-heavy part of the country will see later availability of hydrogen.

But in combination with other measures such as increased use of batteries and lower electrification than assumed by BMWK, the addition of 15GW of new gas-fired capacity by 2030 could be sufficient to meet the supply crunch, according to Erfurt University of Applied Sciences professor for energy economics Konstantin Lenz.

Utilities Steag and Leag told Argus they are planning to build 3GW of gas-fired capacity each by 2030, and EnBW said it is implementing 1.5GW of fuel-switch projects, while Uniper is planning "gigawatt scale" new flexible plants. RWE and Vattenfall did not disclose planned capacity additions. Together, RWE, EnBW, Leag, Vattenfall and Uniper's portfolios account for over half of Germany's installed capacity outside the renewable energy act.

Both Uniper and Steag called for the creation of a capacity market in Germany, which Steag argued would help to close the looming supply gap. Uniper also highlighted that it is uncertain whether the targeted gas-fired additions would be sufficient to cover peak load requirements in the future, and that a capacity market would combine the security of supply instruments Germany has available such as its grid, capacity and lignite reserves and take greater account of measures such as batteries or load management.

Earlier this week, Germany's monopolies commission recommended the creation of a capacity market to replace the country's capacity reserve, which is due to expire in 2025. The capacity market proposed by the commission would comprise three stages and combine decentralised and centralised capacity market elements.

By Helen Senior