Pull to refresh
Logo
What Changed
Following Why Sign Up
Germany awards first gas backup power contracts under coal-exit plan

Germany awards first gas backup power contracts under coal-exit plan

Built World

LEAG and RWE take ten of eleven contracts as critics warn of costs and market concentration ahead of a second auction.

4 days ago: Report: ministry and regulator sought to block LEAG awards

Overview

Updated 3 days ago

Germany's network regulator awarded 11 contracts for 5.16 gigawatts of gas-fired backup capacity on Nov. 3. LEAG and RWE took ten of them, including a LEAG subsidiary, and the average support price was €155,296 per megawatt over 15 years, below the €244,000 cap.

The awards drew warnings that support is concentrating in a few hands and could raise bills. An ICIS analysis cited by Handelsblatt estimated €1.8 billion in extra costs for power customers in a scenario where 9 gigawatts of old lignite plants are retrofitted rather than replaced by new gas plants. A second 4.5-gigawatt round is due to start on Nov. 10, and lawmakers from the Union and the Greens want it postponed until the rules change.

Why it matters

German households and factories will pay a new levy for backup gas plants, testing whether Europe's largest economy can retire coal without losing reliable power.

Questions about this story

Free account needed to ask — your question is kept and asked for you right after sign-up. Answers are public.

No questions yet — be the first to ask.

Key Indicators

5.16 GW
New dispatchable capacity
First tender awarded 11 projects totaling 5.16 gigawatts.
€12B
Support over 15 years
Estimated cost of the awarded contracts, funded by a consumer levy from 2031.
11
Projects awarded
Number of gas plant contracts in the first round.
€155,296/MW
Average support price
Paid each year for 15 years, below the €244,000 per megawatt cap.
~3 GW
LEAG capacity
Mostly lignite-to-gas retrofits at Jänschwalde and Boxberg.
10 of 11
Contracts to two companies
RWE and LEAG, including a LEAG subsidiary, took almost every award.
Less efficient
Retrofit fuel use
LEAG's converted lignite boilers burn more gas per kilowatt-hour than modern combined-cycle plants, Handelsblatt reported.
€1.8B
Extra cost in retrofit scenario
ICIS estimate of added costs for power customers if 9 gigawatts come from retrofitted lignite plants.

Voices

Curated perspectives — historical figures and your fellow readers.

Sign up to generate historical perspectives on this story.

Log in Sign Up

People Involved

Katherina Reiche
Katherina Reiche
Germany's federal minister for economic affairs and energy
Under scrutiny after her ministry explored blocking LEAG's retrofit awards; a legal review found the bids admissible
KM
Klaus Müller
President of Germany's Federal Network Agency
Running the capacity auctions; agency says it checked every bid against the legal criteria
 Adi Roesch
Adi Roesch
Chief executive of LEAG
LEAG won six of its seven projects with lignite-to-gas retrofits
NM
Noemi Mundhaas
Energy expert at Greenpeace Germany
Critic of the first auction results
IL
Ingbert Liebing
Head of the German Association of Local Utilities (VKU)
Critic of the first auction results
MK
Michael Kellner
Energy policy spokesman for the Greens in the Bundestag
Calls for the second auction to be stopped

Organizations Involved

Bundesnetzagentur (BNetzA)
Bundesnetzagentur (BNetzA)
Federal regulator
Ran the first auction and is preparing the second round

Germany's federal network regulator, which runs auctions for backup power capacity.
LEAG
LEAG
Energy company
Won six of seven projects through lignite-to-gas retrofits

Eastern German lignite company owned by EP Group, now planning lignite-to-gas retrofits.
RWE
RWE
Energy company
Won 2.12 gigawatts in first tender

Germany's largest power producer, set to build three hydrogen-compatible gas plants.
FM
Federal Ministry for Economic Affairs and Energy
Government ministry
Designed the auction law; internal review found LEAG's bids admissible

German ministry responsible for energy policy and the capacity auction law.
Greenpeace Germany
Greenpeace Germany
Environmental group
Criticized first auction results

Environmental group that criticized the auction for backing gas over battery storage.
GA
VKU (German Association of Local Utilities)
Industry association
Critic of the first auction results

Association representing municipal power suppliers, which criticized the first backup auction's market concentration.
FG
BDEW (Federation of German Water and Energy Industries)
Industry association
Calls for more diversity among operators

Energy industry association that urged more diversity among operators in the coming auction rounds.

Timeline

July 2026 November 2026

5 events Latest: 4 days ago
Tap a bar to jump to that date

  1. Report: ministry and regulator sought to block LEAG awards

    Latest Policy

    Handelsblatt reported that the economy ministry and the Bundesnetzagentur discussed ways to stop LEAG's retrofit bids before an internal legal review found the bids admissible and blamed the law's drafting. Union energy spokesman Andreas Lenz called for the second auction to be stopped; Greens spokesman Michael Kellner proposed a cap on market share.

  2. Utilities warn auction concentrates market and raises costs

    Reaction

    VKU head Ingbert Liebing said the result brings a market concentration that is bad for competition; BDEW head Kerstin Andreae called for more diversity among operators in later rounds. An ICIS analysis cited by Handelsblatt estimated €1.8 billion in extra costs in a scenario built on retrofits.

  3. Regulator awards 11 gas plant contracts

    Auction

    LEAG wins about 3 gigawatts and RWE 2.12 gigawatts; average support is €155,296 per megawatt.

  4. First tender significantly oversubscribed

    Auction

    The regulator says demand exceeded the 4.5-gigawatt threshold.

  5. First backup-capacity tender opens

    Policy

    Bundesnetzagentur opens the first tender for 4.5 gigawatts of controllable capacity.

Scenarios

1

Second gas auction clears with more winners

Likely Resolves by Q2 2027

Discussed by: Bundesnetzagentur and Reuters

The regulator has said a second 4.5-gigawatt round will follow, with details due Nov. 10 and bids due Dec. 29. If the first auction's oversubscription carries over, more gas projects could win support before the broader capacity market begins.

2

LEAG retrofits face EU state aid review

Possible Resolves by End of 2027

Discussed by: Frankfurter Allgemeine Zeitung and Environmental Action Germany

LEAG's wins rely on converting old lignite plants, which are less efficient and less flexible than new gas plants. Critics say the company could receive support twice, once for decommissioning lignite and again for retrofitting it. That could draw a European Commission state aid review.

3

Battery storage wins in later flexibility rounds

Possible Resolves by End of 2028

Discussed by: Federal economy ministry and Greenpeace

The first auction favored gas because projects had to provide 80 percent of their capacity for at least ten hours in a row. The ministry says later rounds will support flexibility options such as large batteries and demand-side management. If that happens, battery projects could win support outside the long-duration gas scheme.

4

Second gas auction postponed as lawmakers rewrite the rules

Possible Resolves by End of 2026

Discussed by: Union energy spokesman Andreas Lenz, Greens energy spokesman Michael Kellner, Handelsblatt

The second 4.5-gigawatt round is due to start Nov. 10. Lenz wants it stopped until the criteria change, and Kellner wants a cap so no company gains an oversized market share. The gas and hydrogen association's Timm Kehler warns a full stop is risky because some bidders have secured turbines only until the end of the year.

Historical Context

2 moments from history that rhyme with this story — and how they unfolded.

2020-2023

Germany's coal exit auctions (2020-2023)

Germany passed a coal phase-out law in 2020 and ran auctions that paid lignite and hard-coal plants to close early. Operators received compensation, and the first shutdowns reduced coal capacity while leaving gas and renewables to fill the gap.

Then

Coal generation fell, but some operators received large payments.

Now

The model established that Germany would compensate incumbents for managing the exit, a principle repeated in the gas backup auctions.

Why this matters now

The 2026 tender extends that approach: instead of paying plants to close, Berlin is paying them to stay available.

2011-2023

Germany's nuclear phase-out (2011-2023)

After the Fukushima accident, Germany accelerated the shutdown of its nuclear reactors. The last three closed in April 2023, removing steady baseload generation while renewables expanded.

Then

Gas and coal generation rose at times to cover gaps.

Now

The phase-out made reliability and backup capacity central to German energy policy.

Why this matters now

The gas auctions are the latest attempt to secure firm capacity after removing a low-carbon baseload source.

Sources

(12)
+6
Construction Review Reuters via Euronext Clean Energy Wire tagesschau.de BMWE FAZ RWE Handelsblatt Yahoo News ingenieur.de CleanThinking Clean Energy Wire