Germany's Delayed Plans for Hydrogen-Ready Gas-Fired Power Plants
Key Ideas
- German government aims to have hydrogen-ready gas-fired power plants operational by 2030 but the expansion is more likely to occur in the early 2030s due to construction time.
- Auction for 10 GW of hydrogen-ready gas-fired power plants to start in early 2023, with a target for 5 GW to switch to hydrogen use by the late 2030s.
- Plan includes compensating units for higher hydrogen fuel costs and allowing them to bid into the market at the same levels as gas-fired plants after the switch.
- Despite the plans to add steerable power plant capacities for renewables, analysts believe it may not be sufficient to phase out coal-fired power plants from the market.
The German government has revealed plans to tender 10 GW of hydrogen-ready gas-fired power plants with the aim of having them operational by 2030. However, according to Aurora Energy Research, the actual expansion is more likely to occur in the early 2030s due to the 5-7 year construction period for large power plants. The delay in announcing this plan was attributed to challenges in reaching a state-aid agreement with the European Commission. The government intends for at least 5 GW of the new capacities to transition to hydrogen use by the late 2030s. To incentivize this shift, a contract for difference scheme has been proposed to compensate units for higher hydrogen fuel costs. This transition is expected to impact the market as cheaper natural gas capacity will be replaced by hydrogen-run units. The government's overall goal is to support the expansion of renewables, aiming for an 80% share in the power mix by 2030 and climate neutrality by 2045. Despite these efforts, analysts doubt that the plans will be adequate in driving coal-fired power plants out of the market.