On 10 July 2026, Germany’s Act on Safeguarding Security of Electricity Supply and Providing New Capacity (StromVKG) passed the Bundesrat. The Act is intended to pave the way for billions of euros of investment in new power plants and storage facilities – while at the same time facing considerable public controversy.
The debate has focused particularly on new gas-fired power plants. Critics question why Germany, in the midst of its energy transition, should initially support additional fossil-fuel capacity. Others argue that greater emphasis should instead be placed on battery storage.
Yet the StromVKG takes a broader approach: it is intended to facilitate investment in new dispatchable and progressively decarbonised generation capacity as well as storage facilities.
Both face the same challenge:
Who will invest billions in assets whose future market revenues are difficult to predict?
This is precisely where the StromVKG comes in.
Power Plants: Reconciling Security of Supply and Decarbonisation
New dispatchable power plants are intended to provide electricity when wind and solar generation are insufficient – while reducing dependence on imported coal-fired or nuclear power.
Particular attention has focused on gas-fired power plants, which are intended to serve as a bridging technology and to transition to climate-neutral operation using green hydrogen in the medium term.
From a financing perspective, this remains challenging. Uncertain operating hours make future electricity revenues difficult to predict. Gas-fired plants face additional uncertainties regarding the availability and cost of green hydrogen and the subsequent conversion of the facilities.
The StromVKG therefore supplements market revenues with long-term remuneration for providing secured capacity.
Battery Storage: Multiple Revenue Streams, Less Predictability
Battery storage facilities face a different financing challenge.
Their revenues are generated primarily by buying electricity when prices are low and selling it when prices rise, as well as through balancing energy and other system services. Their business model therefore relies on several revenue streams, which may nevertheless be volatile and difficult to predict over the long term.
Where battery storage facilities are included in the StromVKG tender mechanisms, capacity payments are added to the existing market revenues.
Investment in Germany
More predictable revenues may make projects more attractive to both German and international investors and help mobilise private capital for the expansion of energy infrastructure.
For initially gas-fired power plants, however, much will depend on whether the transition from gas as a bridging technology to green hydrogen can also be implemented on an economically viable basis.
Who Finances Bankability?
The StromVKG illustrates how regulation can enable investment.
Rather than directly funding investment costs, the Act creates an additional, longer-term cash flow. This changes the projects’ risk profile and is intended to facilitate the mobilisation of private equity and debt capital.
But this immediately raises the next question: Who finances this additional cash flow?
The refinancing of the capacity mechanism has not yet been conclusively determined. An additional levy has attracted particular criticism because it could place further burdens on consumers and businesses, potentially conflicting with the political objective of reducing electricity prices.
The Bundesrat has therefore called on the Federal Government to examine how the mechanism could be financed without introducing a new levy. If a levy cannot be avoided, the additional burden must be offset by reducing other components of the electricity price.