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

Overview

Updated Yesterday

Germany's federal network regulator awarded 11 contracts for 5.16 gigawatts of gas-fired backup capacity on Nov. 3. The first round of a subsidy scheme is meant to keep the lights on as coal plants close.

LEAG won about 3 gigawatts and RWE 2.12 gigawatts. The average support price was €155,296 per megawatt over 15 years, below the €244,000 cap. Consumers will pay through a levy from 2031, and the plants must be built to switch to hydrogen later.

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.

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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.

Projects awarded

Number of gas plant contracts in the first round.

€155,296/MW

Average support price

Below the €244,000 per megawatt cap, paid over 15 years.

~3 GW

LEAG capacity

Mostly lignite-to-gas retrofits at Jänschwalde and Boxberg.

40-45%

Retrofit efficiency

Modern gas plants reach about 60%, so retrofits burn more gas per unit.

Voices

Curated perspectives — historical figures and your fellow readers.

People Involved

Katherina Reiche

Germany's federal minister for economic affairs and energy

In office; overseeing the capacity auction law

Klaus Müller

President of Germany's Federal Network Agency

Running the capacity auctions

Adi Roesch

Chief executive of LEAG

LEAG won about 3 gigawatts in first tender

Noemi Mundhaas

Energy expert at Greenpeace Germany

Critic of the first auction results

Organizations Involved

Bundesnetzagentur (BNetzA)

Federal regulator

Ran the first capacity auction

Germany's federal network regulator, which runs auctions for backup power capacity.

LEAG

Energy company

Won about 3 gigawatts in first tender

Eastern German lignite company owned by EP Group, now planning lignite-to-gas retrofits.

RWE

Energy company

Won 2.12 gigawatts in first tender

Germany's largest power producer, set to build three hydrogen-compatible gas plants.

Federal Ministry for Economic Affairs and Energy

Government ministry

Designed the capacity auction policy

German ministry responsible for energy policy and the capacity auction law.

Greenpeace Germany

Environmental group

Criticized first auction results

Environmental group that criticized the auction for backing gas over battery storage.

Timeline

July 2026 November 2026

3 events Latest: Yesterday

November 2026
Regulator awards 11 gas plant contracts
Latest Auction

LEAG wins about 3 gigawatts and RWE 2.12 gigawatts; average support is €155,296 per megawatt.
Yesterday
September 2026
First tender significantly oversubscribed
Auction

The regulator says demand exceeded the 4.5-gigawatt threshold.
September 2026
July 2026
First backup-capacity tender opens
Policy

Bundesnetzagentur opens the first tender for 4.5 gigawatts of controllable capacity.
July 2026

Scenarios

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.

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.

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.

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.