Germany to implement capacity market for energy security

Germany is implementing a new capacity market mechanism to stabilize its electricity supply as it shifts toward weather-dependent renewable energy sources like wind and solar. Following approval from the European Commission, the Bundestag, and the Bundesrat, the StromVKG legislation establishes a system where grid operators will purchase the readiness to provide power through competitive auctions.

This mechanism aims to ensure security of supply during periods of low renewable production and high demand. Contracts will be available to a wide range of technologies, including existing and new power plants, energy storage facilities, and demand-side response providers. In some instances, resources from other EU countries connected to the German grid may also be eligible.

Initial auctions are scheduled for 2026, with the goal of contracting 9 GW of new, long-term capacity located within Germany across two rounds. These resources must be capable of operating at full rated power for at least 10 consecutive hours. While gas remains part of the system, new blocks are expected to transition to hydrogen. The full implementation of the capacity market is targeted for 2031.