The European Commission approved a new capacity mechanism for electricity supply sponsored by the German government, saying that it complies with EU rules. The mechanism will enter into full force in 2031. It will provide all capacity needed to meet reliability standards, as defined by the European Resource Adequacy Assessment 2025.
The system aims to ensure sufficient capacity to produce and store electricity while decarbonising. The mechanism will work with all technologies, new and old, as well as cross-border ones. The cost is estimated at between €1 and €3 billion for 2031, with annual costs from 2032 to 2045 between €900 million and €2.3 billion, according to subscriptions.
The first auctions for the future support will start this year and in 2027, in case of undersubscriptions, but only for long-term capacity supply based in Germany. All other types will be tendered in 2027 and 2029. The contracts will all be up to 15 years, with companies benefiting from such long terms being required to operate in a climate-neutral way by 2045, while gas-fired power plants will have to be hydrogen-ready.
The Commission approved this plan as necessary and appropriate. It is also considered proportionate, since it will involve projects selected through a transparent process, thereby limiting its potential impact on competition and trade between member states.
