Germany’s First 4.5 GW Capacity Auction Explained

Germany launches a 4.5 GW capacity auction

Germany’s Federal Network Agency opened the first 4.5 GW auction under the new Electricity Supply Security and Capacity Act (StromVKG), with bids due by 8 September. Successful projects will receive capacity payments for keeping the plant or storage unit available for 15 years — a direct answer to the government’s need for firm, dispatch‑able power as renewables grow.

How the auction is structured: payments, timeline and regional split

The auction is the first of six rounds planned through 2031. Two 4.5 GW rounds will focus on long‑duration capacity, followed by a >2 GW round for conventional generation and three more rounds from 2029 onward. At least one‑third of the volume must be awarded to projects in the “grid‑technical north”; bids for the “grid‑technical south” are penalised by a €16,000/MW deduction. The maximum allowed bid price is €244,000 per MW of reduced capacity per year, where “reduced capacity” reflects statutory reduction factors that differ by technology.

Strict technical rules for battery storage and local‑content requirements

Battery Energy Storage Systems (BESS) can only bid if they can discharge continuously for a minimum of 10 hours. A reduction factor of 0.58 applies to 10‑hour systems and 0.85 to 20‑hour systems – the same factor used for combined‑cycle gas turbines (CCGT). Batteries must also meet 100 % technical availability (CCGTs are allowed 85 %) and a round‑trip efficiency of at least 92 %, a hurdle that could exclude many flow‑battery concepts. In addition, key components such as cells and inverters must be sourced from the EU or countries with a free‑trade agreement, and every project must be able to provide instantaneous reserve power.

Industry reaction: criticism and cost impact

The design has drawn fire from storage developers who say the technical thresholds make long‑duration batteries effectively uncompetitive, even though the tender is formally technology‑neutral. Analysts note that the €244,000/MW ceiling is relatively generous; several studies have estimated that it could increase electricity costs for consumers by slightly more than €0.01/kWh. The generous price signal is intended to attract enough firm capacity to cover periods when wind and solar are low.

EU state‑aid uncertainty and legal questions

Developers must submit bids even though the European Commission has not yet cleared the StromVKG under EU state‑aid rules. Critics argue that launching the scheme without prior Commission consultation forces investors to commit before the legal framework is settled. Some legal experts suggest the levy‑financed model may sidestep traditional state‑aid scrutiny, but the final outcome remains unclear.

What it means for Israel’s solar and storage market

While Germany is paying up to €244 per kW·year to guarantee firm capacity, a typical 1 kW rooftop PV system in Israel’s central region produces about 1 700 kWh annually, worth roughly ₪816 at the residential tariff. In other words, the German capacity payment per kW is of the same order as the entire yearly revenue of an Israeli rooftop panel.

For an Israeli homeowner, a 10 kW system costs about ₪31 500 and generates ~17 000 kWh/year, earning ~₪8 160 at the residential tariff of ₪0.48/kWh – a payback of just under 4 years. By contrast, a 1 MW battery that wins the German auction would receive €244 000 per year, which would dwarf the annual cash flow of a comparable‑size solar‑plus‑storage installation in Israel. The German model therefore signals a policy direction where large‑scale storage is heavily subsidised to back up renewables, a contrast to Israel’s market‑driven leasing approach.

Looking ahead, if Germany’s capacity market succeeds in attracting enough long‑duration storage, it could set a benchmark for other European nations and eventually influence Israeli policymakers who are debating how to secure firm capacity as the country pushes toward its 30 % renewable target for 2030. For now, Israeli investors can watch the German auction as a case study in how generous capacity payments can accelerate storage deployment – but they must also weigh the higher cost to consumers and the regulatory uncertainties that still loom.

---

Key dates: Bids close 8 Sept 2026; winners announced 3 Nov 2026; second auction deadline expected 10 Nov 2026.

Sources: PV Magazine, Ember – Germany’s battery opportunity, Timera Energy – What StromVKG means for the power system, ESS‑News – Germany opens first 4.5 GW capacity auction.

Sources & further reading

• Germany's battery opportunity - Ember
• Germany's new capacity tenders: what StromVKG means for the...
• #stromvkg | Matthias Janssen | 12 comments - LinkedIn
• Germany's Battery Storage Reality - Instagram
• Power plants in Germany - Uniper