Gas
Germany awards all capacity auction slots to gas projects
Natural gas developments secured 5.16 gigawatts in Germany's inaugural capacity auction to provide reliable backup power as coal generation phases out.
Key points
- Gas-fired projects won 5.16 gigawatts of derated capacity in Germany's first capacity auction.
- Major energy firms LEAG and RWE secured over 99 percent of the awarded capacity.
- Auction rules requiring 10 consecutive hours of supply prevented battery storage from competing.
What happened
According to OilPrice.com reporting, natural gas-fired projects secured all 5.16 gigawatts of derated capacity in Germany's initial capacity auction. More than half of this total is allocated to developments located at existing coal sites. The procurement aims to establish dependable backup power as the country phases out coal generation and expands intermittent renewable energy sources. This infrastructure is designed to maintain grid stability during extended periods of low wind and solar output, which are commonly referred to as Dunkelflaute.
Major energy companies LEAG and RWE captured over 99 percent of the awarded capacity. LEAG's success in utilizing its existing lignite sites demonstrates the financial and operational advantages of reusing established grid connections and infrastructure. By leveraging existing sites, developers can significantly lower investment costs and shorten development timelines. Almost 12 gigawatts of bids competed against a target of 4.5 gigawatts, with a volume-weighted average award price of approximately 155,000 euros per derated megawatt per year.
Auction design and future outlook
The auction structure required participating projects to deliver at least 80 percent of their installed capacity across 10 consecutive hours. OilPrice.com noted that this specific duration requirement favored gas generation and created an economic barrier for battery storage systems. Future capacity auctions may incorporate different contract terms and duration requirements that could offer more favourable conditions for batteries and alternative flexibility sources.
Winning gas plants are also subject to hydrogen-readiness requirements, creating a potential future market for hydrogen suppliers. However, technical readiness does not guarantee actual future hydrogen consumption, leaving the long-term transition economics uncertain for plant operators.
Why it matters
For energy investors and policymakers in emerging markets, Germany's auction highlights the persistent tension between rapid decarbonisation and the immediate operational necessity for baseload reliability. As industrial nations balance aggressive renewable targets with the reality of intermittency, natural gas continues to play a vital bridging role supported by capacity payment mechanisms.
While Germany achieves complete electrification with 100 percent access to electricity according to World Bank figures, developing economies face different structural challenges in securing reliable power generation. Policymakers across Africa must carefully evaluate how capacity markets and long-term backup mechanisms can be structured to attract private investment into critical grid infrastructure without locking economies into high-emission pathways that lack clear transition timelines to cleaner fuels.
Original reporting
This article draws on the following reports. Read them in full on the publishers’ sites.
Context from CEII
Gas is the flexible backbone of many grids and the designated transition fuel in many national plans, from LNG trade to domestic LPG and CNG. Supply security and pricing drive both power reliability and emissions.
17.9% of electricity in Germany came from gas in 2025Countries in this story
Written by the CEII Desk, the Centre’s automated newsroom, from the reporting credited above and CEII’s own data. Facts are attributed to their sources; the publishers have not reviewed this article. Spotted an error? Tell our editors.
