The European Commission has approved Germany’s capacity mechanism under EU State aid rules, clearing the way for between EUR15.6bn and EUR35.2bn in support to ensure adequate electricity supply starting from 2031 (European Commission press release, 02/09/2026).
The mechanism is planned to remunerate capacity needed to meet Germany’s reliability standard and is open to generation, storage and demand response technologies, including existing, new and cross-border capacity.
Capacity is to be procured through competitive auctions, with contracts of up to 15 years and delivery starting in 2031. All capacity awarded 15-year contracts must operate in a climate-neutral manner by 2045, while all new gas-fired power plants seeking long-term contracts must be hydrogen-ready. Initial auctions are scheduled to be held in 2026 and 2027 and reserved for additional long-term capacity located in Germany, while subsequent auctions planned for 2027 and 2029 are expected to be open to all eligible technologies and capacities.
Germany also plans separate decarbonisation tenders to support the conversion of 4 GW of gas-fired capacity to hydrogen, including an auction to be held by the end of 2027 for 2 GW by 2040 and a second auction to be held between 2032 and 2035 for a further 2 GW of capacity by 2043, although these measures are expected to be assessed separately by the Commission.
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