The European Commission and the German government have reached a preliminary agreement on plans to subsidize the construction of new gas-fired power stations, the Economy Ministry in Berlin said on Thursday.
The ministry said they had agreed with the commission on key elements of Germany’s power plant strategy, which is intended to safeguard the country’s energy supply.
While he final proposal still requires the formal go-ahead of the commission, which acts as the EU’s competition watchdog, Berlin welcomed the breakthrough.
Economy and Energy Minister Katherina Reiche said it marked “a decisive step for security of supply in Germany.”
The German government argues the additional gas-fired power plants are needed as backups for when renewable energy sources cannot meet electricity demand, for example due to a lack of wind or sunshine.
The tentative approval covers additional capacities of 12 gigawatts, which will be put out to tender later this year.
Berlin has been arguing that the planned billions in state aid are necessary as gas-fired power plants used as backups would often not be operated to full capacity, making them less profitable and less attractive to investors.
The new plants are likely to be mainly built in Germany’s south which is home to large industrial centres but also to electricity grid bottlenecks.
Germany’s energy transformation
Germany has been rapidly changing its energy supplies, and aims to phase-out coal-fired power generation by 2038. It closed its last nuclear power plants in 2023 over safety and environmental concerns, and has been expanding its renewable energy generation.
Burning coal emits more greenhouse gas than burning natural gas.
The expansion of the electricity grids is lagging behind the expansion of wind power, which is mainly produced in the north and which often needs to be transferred across large distances.
State aid is subject to strict rules in the European Union in order to prevent distortion of competition, often requiring approvals by the commission in Brussels.
This is to prevent financially strong countries, such as Germany and France, from giving their companies disproportionate advantages over companies in smaller EU countries.