Germany opens first 4.5 GW capacity auction including long-duration storage

Germany’s Bundesnetzagentur has launched the first auction under Germany’s new Electricity Supply Security and Capacity Act (StromVKG). Companies have until Sept. 8 to submit bids for new dispatchable generation and long-duration energy storage capacity.

The first auction covers 4.5 GW of capacity. Successful bidders will receive capacity payments in exchange for keeping their facilities available for 15 years.

The auction is the first of six planned rounds. Two auctions of 4.5 GW each are scheduled for long-duration capacity, followed by an auction for more than 2 GW of generation capacity. Three additional auctions are planned from 2029 onward.

To support grid expansion, the auction includes a regional allocation mechanism. At least one-third of the auction volume will initially be awarded to projects in the “grid-technical north.” Projects in the “grid-technical south” will then be considered, with bids evaluated after applying a deduction of €16,000 ($18.274)/MW from the bid price.

The maximum bid price is €244,000/MW of reduced capacity per year. Reduced capacity is calculated using statutory reduction factors that vary by eligible technology.

Strict on storage

Battery energy storage systems are eligible only if they can discharge continuously for at least 10 hours. A reduction factor of 0.58 applies to 10-hour systems, rising to 0.85 for 20-hour systems—the same value assigned to combined-cycle gas turbine (CCGT) plants.

The rules also require battery storage systems to achieve 100% technical availability, compared with 85% for CCGT plants. In addition, battery systems must demonstrate a round-trip efficiency of at least 92%, a requirement that could prove difficult for some long-duration storage technologies, including flow batteries.

The auction also includes local-content requirements. Key components, including battery cells and inverters, must originate in the European Union or in countries that have a free trade agreement with the bloc. All projects must also be capable of providing instantaneous reserve power.

The Federal Network Agency plans to announce the successful bidders on Nov. 3. It expects to publish the deadline for the second auction as early as Nov. 10.

“The StromVKG is expected to enter into force shortly. Through this legislation, lawmakers have created a framework to ensure sufficient firm capacity remains available in the electricity market. This is essential for security of supply and for periods when renewable generation is insufficient,” said Klaus Müller, president of the Bundesnetzagentur. “The agency began preparing for implementation before the law was passed. We will now conduct the auctions as quickly and carefully as possible, with the aim of enabling the first projects to move forward without delay.”

Industry criticism

The auction design has drawn criticism from the energy storage sector. Industry representatives argue that, although the procurement exercise is formally technology-neutral, its technical requirements make long-duration battery storage systems effectively uncompetitive.

Several recent studies have found that while some new gas-fired generation may still be needed in a least-cost electricity system, long-duration energy storage could substantially reduce that requirement.

Critics have also questioned the maximum bid price of €244,000/MW, describing it as comparatively generous. Because the scheme will be financed through a levy, several analyses estimate it could increase electricity costs for consumers by slightly more than €0.01/kWh.

Companies must submit bids even though the European Commission has not yet approved the StromVKG under EU state aid rules. Critics note that, unlike similar support schemes, the government did not consult the Commission before launching the mechanism. As a result, developers are being asked to commit to projects while the state aid review remains unresolved.

Some legal experts argue that the StromVKG may not require conventional state aid approval because it is financed through a levy rather than the federal budget. It remains unclear whether the European Commission will nevertheless open a formal state aid investigation.