Germany’s First Capacity Auction Was Built for the Long Night

Germany has awarded its first contracts for new firm capacity, at prices well below the ceiling. For battery developers, the more useful detail sits in the rules: this round asked for something very specific, and the rounds that follow ask for something different.

On 3 November, the Bundesnetzagentur, Germany’s energy regulator, published the results of the first tender under the StromVKG, the electricity supply security and capacity law enacted on 21 July 2026. The law’s stated aim is to introduce a capacity market for 2031, securing enough firm electrical output to meet demand.

What was awarded

The round sought 4,500 MW of reduced capacity. That is an accredited measure rather than installed output, explained below, so every volume in this tender should be read that way.

It drew 41 bids totalling around 11,958 MW of reduced capacity, more than two and a half times the volume on offer. Seven were excluded, for reasons such as missing mandatory information or evidence.

Eleven bids won, totalling 5,160 MW of reduced capacity. The total is above the target because the bid that first crossed the line is still awarded, as the law provides. The volume-weighted average award was €155,296 per MW of reduced capacity per year, against a ceiling of €244,000. Individual awards ranged from €129,551 to €189,970. Each winner is paid its own bid, and each contract runs for 15 years from 1 November 2031.

The winners were RWE Generation, with three awards in North Rhine-Westphalia; Lausitz Energie Kraftwerke, with four in Brandenburg and two in Saxony; Gaskraftwerk Leipheim 20, with one in Bavaria; and Stadtwerke Karlsruhe, with one award covering a pool of twelve units in Baden-Württemberg. The regulator’s published list names each winner and its site, though not the technology behind each award.

Klaus Müller, the regulator’s president, described a contested round. “There was intense competition between different technologies, power plants and electricity storage,” he said. “This competition led to comparatively low award values.” He also set out its purpose: “In a system that is becoming more volatile, there must be enough controllable capacity that can respond in every situation. We now have the certainty that it will actually be built.”

What this round asked for

The answer to why this round looked the way it did lies in its name. It was a tender for long-duration capacity, and storage, batteries included, was eligible: the law counts storage among the generation plants that can bid. But the law sets three separate requirements, each doing a different job, and they are easily run together.

1. Energy duration: can the plant keep going?

This is the qualifying test. The plant had to be able to supply 80% of its installed output, for storage its full discharge rating, for at least ten consecutive hours. Storage also had to be able to reach that state within three hours at any time. Separately, each storage bid had to declare a duration of at least ten hours at the output offered, or be excluded. On our arithmetic, the plant test means a battery must hold energy equal to at least eight hours at full discharge. A battery could offer less than its full rating, but the plant still had to pass the test on its installed output. This round was therefore open to storage designed for very long discharge, not the shorter-duration systems the term “battery storage” usually brings to mind.

2. Capacity accreditation: how much is it counted for?

Passing the duration test makes a plant eligible. It does not settle how much capacity the plant is credited with. That is the job of the reduction factor. A bid’s reduced capacity is the output it offers multiplied by a factor set for its technology, reflecting how reliably it contributes when the system is under strain. All volumes and prices in the tender are expressed in these terms. For this round, the factors are fixed in the law itself, and for storage they vary with the duration the plant can sustain. A pooled bid takes the capacity-weighted average of its plants’ factors. The awarded 5,160 MW is therefore accredited capacity, not installed output, and the regulator’s results do not state the installed capacity behind it.

3. Grid services: what else must it provide?

The third requirement has nothing to do with energy or accreditation. It concerns the stability of the grid itself. Plants on 15-year terms that connect at high voltage, or are 10 MW or larger, must be able to provide inertia, the instantaneous response that steadies the grid’s frequency, even when not generating. The required amount is set by a formula tied to the plant’s installed output. A battery can meet it through short-term overload or an oversized inverter, but only inverter capacity above 130% of the battery’s agreed grid connection counts. The requirement can also be met in whole or part by other qualifying equipment connected at high voltage.

Other conditions

Gas-fired plants on 15-year terms had to show a plan for running on hydrogen. Where a plant is one of the products listed in the law, its key components had to be made in the EU or in a country with an EU free trade agreement or customs union.

The ranking also favours the south of the grid, but in a narrower way than it might first appear. Bids are first ranked at face value up to the point where gas-fired power plants in the north would take more than a third of the round. Beyond that point, gas-fired power plants in the south are ranked as if their bids were €16,000 per MW per year lower. The adjustment affects ranking only; winners are still paid their actual bids. It applies to gas-fired power plants, not to storage, and to a pooled bid only if every plant in the pool is a southern power plant.

Where batteries come in next

The second long-duration round closes on 29 December, and the regulator will announce it on 10 November. Its volume is 4.5 GW reduced by the amount the first round overshot, which on our arithmetic points to about 3.84 GW of reduced capacity. The regulator will confirm the figure. The ten-hour rules apply again.

After that, the ground shifts. On 18 May 2027, a 2 GW tender opens to generation plants, storage included, on 15-year terms, subject to the law’s site and other conditions. The ten-hour requirement belongs only to the long-duration rounds, so it does not apply. Then come two broader capacity tenders, on 1 December 2027 and 1 October 2029, which also admit flexible demand and offer terms of one, seven or fifteen years. For those rounds, the reduction factors are set by the regulator rather than fixed in law, and must be published at least six weeks before each tender is announced. For storage they vary with duration. Those factors, more than anything else, will decide how a two- or four-hour battery is credited against other technologies.

The Ledger

It would be easy to read this result as batteries losing out. The rules suggest something more precise. Germany chose to start with the narrowest requirement: capacity that can run for ten hours or more, through a long, still, dark spell. Eleven bids answered it. The rounds that follow ask a broader question, and for battery developers the date to watch is not 3 November but 18 May 2027, along with the reduction factors published before it. Germany has begun with the long night. The shorter evenings are still to come.

Sources

Bundesnetzagentur press release, “StromVKG – Ergebnisse der ersten Ausschreibung für Langzeitkapazitäten”, 3 November 2026 (results, regional split, Klaus Müller’s statement). Bundesnetzagentur, tender page for the first bid date of 8 September 2026 (lowest and highest awards, award timing, tender rules). Bundesnetzagentur, list of awards under §51(1) no. 2 StromVKG (winners and sites). Strom-Versorgungssicherheits- und Kapazitätengesetz (StromVKG) of 21 July 2026, §§1–6, 12, 13, 15–17, 22–24, 38, 48 and 49 and Annex 4 (aims, definitions, tender dates and volumes, eligibility, ten-hour rules, reduced capacity and reduction factors, inertia, ranking, later tenders). Quotations translated from German by The Battery Ledger.

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