Germany's First Capacity Auction Is Oversubscribed. Now It Must Avoid Paying for the Wrong Plants

The bidding window for Germany's first auction of long-term capacity under the new electricity supply security and capacity law, the StromVKG, closed on 8 September 2026. The next day the Bundesnetzagentur said the round had been clearly oversubscribed. The auction offered 4,500 MW of so-called reduced capacity, a measure that weights each plant's nameplate output by a statutory factor reflecting its real contribution to security of supply. Successful bidders will be obliged to keep their capacity available for 15 years in return for an annual payment set in competition, with a ceiling price in this round of EUR 244,000 per megawatt of reduced capacity per year.

The auction is the first concrete step in the power plant strategy that Germany agreed in principle with the European Commission in January 2026, and which the Commission subsequently approved as a capacity mechanism worth up to EUR 35 billion. Our view is that strong participation is good news, because it suggests the 15-year contract and ceiling price are sufficient to attract investment. Germany is phasing out coal, has already closed its nuclear plants, and relies increasingly on wind and solar.

The ten-hour criterion in the auction, which requires plants to sustain output for long periods, is aimed precisely at this problem. The list of bidders has not been published, but many companies had publicly declared interest, including RWE, EnBW, Uniper and LEAG, as well as municipal utilities and groups such as Trianel. Germany's transmission grid has long struggled to move power from the windy north to the industrial south. The power plant strategy was designed around plants that can eventually run on hydrogen, and the climate-neutral operation of new plants by 2045 is part of the framework.

The capacity payments will be passed on to consumers, likely through network charges or a levy. Germany's first capacity auction has attracted strong interest, which removes the risk that no one would build.