Germany on Wednesday secured the European Union's approval for a power-capacity mechanism that could cost about 35.2 billion euros ($40.5 billion) through 2045, paving the way for a system designed to ensure the country has enough electricity supply.
The European Commission approved the scheme under EU state-aid rules, allowing Germany to begin competitive auctions for capacity available from 2031.
The mechanism is expected to cost between 1 billion euros and 3 billion euros in its first year, with annual costs estimated at 900 million euros to 2.3 billion euros from 2032 through 2045.
The program will pay power generators, storage operators, and consumers who can adjust their electricity use to maintain capacity that can be called on when needed.
The commission said that existing and new facilities will be eligible, along with qualifying cross-border capacity, with contracts running for up to 15 years.
The EU's executive arm said that under the scheme, capacity will be selected through competitive auctions based on Germany's reliability standard, which was established using the European Resource Adequacy Assessment 2025.
The first auctions, in 2026 and potentially 2027, will be reserved for additional long-term capacity located in Germany. Auctions in 2027 and 2029 will subsequently open to existing and new capacity, as well as to a broader range of technologies.
The mechanism also includes measures to prevent new gas generation from becoming a long-term source of carbon emissions. New gas-fired plants seeking 15-year capacity contracts must be hydrogen-ready and eventually capable of switching away from natural gas.
The Commission said the scheme was necessary and appropriate to secure electricity supply and proportionate because aid will be awarded through transparent, nondiscriminatory auctions. It said safeguards would limit the impact on competition and trade across the bloc.