Germany Halves Planned Gas Power Buildout in New Decarbonisation Deal

Germany has scaled back its planned gas-fired power rollout to 10 GW-roughly half of what was proposed earlier this year-as part of a political compromise balancing energy security and decarbonisation. Chancellor Friedrich Merz and coalition partners agreed the revised plan late Thursday, aiming to ensure backup capacity for renewables without locking in long-term fossil dependence.

All new plants must be hydrogen-ready, with tenders requiring technical capability for future conversion. The European Commission has signalled preliminary support for the updated scheme, which also includes 2 GW of technology-neutral capacity, potentially battery storage.

Subsidies worth billions will be needed to attract developers, given the low utilisation of such backup plants. Tenders for 8 GW will be launched next year, targeting operation by 2031. Additional tenders in 2026–27 will require rapid conversion from gas to hydrogen, with another technology-neutral auction planned for 2029.

Halving the planned gas-fired buildout from ~20 GW to 10 GW, while requiring all plants to be hydrogen-ready and adding 2 GW of technology-neutral (likely battery) capacity, reflects a considered compromise between energy security and lock-in risk. Backup capacity is genuinely needed as renewables scale, but committing decades of gas-consumption demand at a time of transition creates stranded-asset risk that this design attempts to mitigate.

The hydrogen-ready requirement is technically defensible but commercially uncertain - depending on whether green hydrogen becomes cost-competitive and available at scale within the plants' useful life. The subsidies required to attract developers, given the low expected utilisation of backup plants, reflect the fundamental economic challenge of building infrastructure that mostly sits idle.

For power generators, industrial energy consumers, hydrogen producers and their financiers, Cognitud's energy transition, climate action and market intelligence teams help clients evaluate exposure to Germany's evolving power-market design, structure hydrogen-readiness investment cases, and prepare disclosures aligned with CSRD, ISSB and EU taxonomy that reflect the transition risks and opportunities in Europe's largest industrial economy as it navigates the post-Russian-gas energy landscape.