EU approves German capacity mechanism

The European Commission has approved Germany’s new capacity mechanism under EU State aid rules, clearing the way for up to €35.2 billion in state support to strengthen electricity supply security from 2031.

The mechanism is designed to support sufficient capacity for power generation, energy storage and demand-side flexibility. Support will be allocated through competitive auctions and will be open to different technologies, including existing and new facilities, storage and demand response.

The scheme is particularly relevant for the development of battery energy storage and flexible power capacity. New gas-fired plants receiving support will need to be hydrogen-ready, while participating facilities must operate on a climate-neutral basis by 2045 at the latest.

Germany is expected to hold its first capacity auction in September 2026, with the first auction covering 4.5 GW. Further auctions for long-duration capacity are planned for 2027–2029.