German Government Tightens Eligibility Conditions for Capacity Auctions of Coal-to-Gas Conversion Projects

en.Wedoany.com Reported - On November 10, the German Federal Ministry for Economic Affairs and Energy decided to introduce new rules tightening the eligibility conditions for existing coal-fired power units converted to gas-fired power plants to participate in electricity capacity auctions. Under the new rules, only coal-fired power units that were shut down before July 22, 2026, or are legally required to be permanently closed by January 1, 2030, may, after conversion, be recognized as new projects and counted toward the minimum investment requirement.

The new rules also clarify the scope for calculating the minimum investment amount: eligible projects must invest at least EUR 431,000 per megawatt. Only investments in new power plants or in expanding the generating capacity of existing facilities count toward the threshold; ordinary equipment replacement and facility modernization are not recognized. The German government's adjustment is mainly aimed at determining whether coal-to-gas conversion genuinely creates additional generating capacity, and preventing coal-fired facilities that could otherwise continue operating from obtaining new-project subsidies merely through fuel switching.

The rule adjustment will not affect contracts already awarded in the first round of capacity auctions. German energy company RWE and German energy company LEAG, which is not part of RWE, won 10 of the 11 projects awarded in the first round, with LEAG planning to build gas-fired generating facilities at former lignite plant sites in Brandenburg and Saxony and to utilize existing power infrastructure.

The German Federal Network Agency launched the second round of long-term electricity capacity auctions on November 10, planning to procure 3,840 megawatts of eligible capacity, with a bid deadline of December 29. The maximum bid price for this auction remains EUR 244,000 per megawatt per year, with a capacity guarantee subsidy period of 15 years. The first round of auctions ultimately awarded 11 projects with a combined capacity of approximately 5,160 megawatts.

Under the arrangements of Germany's Power Supply Security and Capacity Act, newly built gas-fired power plants will assume the task of backup electricity supply from 2031, mainly to address electricity shortfalls when wind and solar generation is insufficient. The relevant projects must also meet subsequent fuel conversion requirements, switching to climate-friendly hydrogen by 2045 at the latest.