en.Wedoany.com Reported - Germany's Federal Network Agency has launched the first auction under the newly enacted Electricity Supply Security and Capacity Act (StromVKG), with companies required to submit bids for new dispatchable generation and long-duration energy storage capacity by September 8. This round covers 4.5 GW of capacity, with winners receiving capacity payments and maintaining facility availability for 15 years.
This auction is the first of six planned rounds. Two long-duration capacity auctions of 4.5 GW each have been scheduled, followed by a generation capacity auction exceeding 2 GW. Three additional auctions will be held starting in 2029. To support grid expansion, a regional allocation mechanism has been set: at least one-third of the capacity is initially awarded to "Grid Technology North" projects, followed by consideration of "Grid Technology South" projects, with €16,000 (approximately $18,274) per megawatt deducted from the bid price during evaluation. The maximum bid price is €244,000 per megawatt of reduced capacity per year, with reduced capacity calculated using statutory reduction factors that vary by eligible technology.
Battery energy storage systems must meet strict conditions: only those capable of continuous discharge for at least 10 hours are eligible. A reduction factor of 0.58 applies to 10-hour systems, rising to 0.85 for 20-hour systems, the same as for combined cycle gas turbine (CCGT) plants. The rules also require battery energy storage systems to achieve 100% technical availability, compared to 85% for CCGT plants. Battery systems must demonstrate a round-trip efficiency of at least 92%, a requirement that may pose challenges for certain long-duration storage technologies, including flow batteries. The auction also includes localization requirements: key components, including battery cells and inverters, must be produced in the EU or in countries with which the EU has free trade agreements. All projects must also be capable of providing immediate backup power.
The Federal Network Agency plans to announce winners on November 3, with the deadline for the second auction round expected to be announced as early as November 10. President Klaus Müller stated that StromVKG is expected to take effect soon, and that lawmakers have established a framework through this legislation to ensure the electricity market maintains sufficiently reliable capacity, which is crucial for supply security and periods when renewable generation is insufficient. The agency began preparations for implementation before the law was passed and will conduct auctions as quickly and carefully as possible to enable the first projects to move forward smoothly.
The auction design has drawn criticism from the energy storage industry. Industry representatives argue that while the procurement is technically neutral in form, its technical requirements effectively render long-duration battery storage systems uncompetitive. Several recent studies have found that while some new natural gas generation may still be needed in least-cost power systems, long-duration storage can significantly reduce this demand. Critics also question the relative generosity of the maximum bid price of €244,000/MW, and since the program will be financed through a surcharge, several analyses estimate it could increase consumer electricity bills by slightly more than €0.01/kWh.
Although the European Commission has not yet approved StromVKG under EU state aid rules, companies are still required to submit bids. Critics note that unlike similar support programs, the government did not consult with the European Commission before launching the mechanism. Consequently, developers are being asked to commit to projects while the aid review remains unresolved. Some legal experts believe StromVKG may not require traditional state aid approval because it is financed through a surcharge rather than the federal budget. It remains unclear whether the European Commission will therefore initiate a formal state aid investigation.
