Germany Bets Big on Natural Gas to Keep the Lights On

By Rystad Energy - Nov 11, 2026, 11:00 AM CST Germany is turning to new gas-fired power plants to provide reliable electricity when wind and solar generation are insufficient. Energy giants RWE and LEAG secured more than 99% of the contracts, benefiting from existing coal power plant sites, while strict operating requirements left battery storage projects without awards. Although competition pushed winning bids below the auction's price ceiling, costs remain high, and future auctions could offer more opportunities for batteries and other energy storage technologies. Gas-fired projects secured all 5.16 gigawatts (GW) of derated capacity in Germany's first capacity auction, with more than half going to developments at existing coal sites. The results show how the search for dependable backup power is giving established generators an advantage, while batteries missed out entirely.Derated capacity is adjusted to reflect each project's expected contribution to security of supply.As coal generation is being phased out and renewable capacity expands, Germany needs reliable backup power during prolonged periods of low wind and solar output, known as Dunkelflaute. Capacity payments reward operators for keeping that supply available.Existing power sites offer an advantageLEAG and RWE secured more than 99% of the awarded capacity. LEAG's success at its existing lignite sites highlights the potential value of reusing grid connections and other infrastructure. For developers, access to an established power plant site can help reduce investment costs and development timelines.Duration rules shape the outcomeThe first round required projects to deliver at least 80% of their installed capacity for 10 consecutive hours. That favored gas generation and made it difficult for batteries to compete economically. The result reflects the specific type of backup supply Germany sought in this auction.Competition lowers bids but costs remain substantialAlmost 12 GW of bids competed against a 4.5 GW procurement target. The volume-weighted average award price was about €155,000 per derated megawatt per year, 36% below the ceiling. Even so, it exceeded recent European capacity auction benchmarks. Germany is procuring new long-duration capacity with hydrogen-readiness requirements, which limits direct comparisons with markets that also support existing assets.The next opportunities depend on auction designLater auctions could create more favorable conditions for batteries and other sources of flexibility, depending on their duration requirements and contract terms. For hydrogen suppliers, the winning gas plants offer a potential future market. However, readiness to switch fuel does not guarantee hydrogen consumption, leaving the economics of that transition unresolved.By Rystad EnergyMore Top Reads From Oilprice.comAPI Shows Sharp Build in US Crude Oil, Distillate InventoriesChina Is Buying Oil Again After Months of Living Off Its StockpilesU.S. Traders Weigh the Cost of Taking Trump’s Russian Diesel Download The Free Oilprice App Today Back to homepage