Germany’s energy transition is entering its next phase. Whilst renewables and BESS are transforming the power sector, flexible CCGT (combined cycle gas turbine) capacity will be essential to keep the system reliable, resilient and investment-ready. With the planned introduction of the StromVKG, Germany is creating a new market for the assets that will bridge the gap between clean power ambitions and security of supply.
Watson Farley & Williams recently hosted the webinar ‘CCGT Webinar’ to explore the key legal and commercial considerations shaping CCGT developments in Germany. The discussion focussed on the evolving regulatory framework under the StromVKG, permitting requirements, project structuring, financing considerations and the practical challenges associated with developing, financing and delivering CCGT projects.
Below are some of the key insights from the webinar.
Regulatory Framework (Britta Wißmann)
The StromVKG establishes the legal framework for new gas-fired power plants (“CCGTs”) and aims to ensure security of supply in Germany from 2031 onwards. It introduces a capacity remuneration mechanism that complements the existing energy-only market, providing investors with greater revenue certainty whilst maintaining market-based dispatch incentives. To participate successfully, projects must meet strict requirements regarding emissions, hydrogen readiness, grid connection and technical availability. The framework also introduces ambitious timelines, making early project development and regulatory planning critical for successful participation in upcoming capacity auctions.
Key Takeaways:
- StromVKG creates a new capacity market framework to safeguard Germany’s security of supply from 2031 onwards;
- early planning of permitting, grid connection and project development is essential to meet strict implementation deadlines; and
- hydrogen readiness, emissions compliance and technical availability are key eligibility requirements for project participation.
Permitting (Dr Christine Bader)
Permitting is one of the most critical workstreams for delivering new CCGT projects on schedule. The permitting roadmap may involve multiple stages, from preparatory works, to preliminary rulings, partial permits and/or approval of early construction and final operating permits. Project success depends on the early identification and mitigation of permitting risks, close coordination with authorities and a realistic project timeline. Proposed legislative measures under the Flexibility Acceleration Act (“FlexBG”) could significantly shorten approval procedures and legal challenges, providing greater certainty for investors and developers aiming to meet the 2031 availability deadline.
Key Takeaways:
- permitting remains the critical path for the timely delivery of new CCGT projects;
- early-start permits and partial approvals can significantly accelerate project schedules; and
- proactive engagement with permitting authorities helps reduce implementation risks and delays.
Construction & Project Realisation Strategies (Dr Christian bauer)
The successful implementation of StromVKG projects requires a robust contractual and delivery strategy. EPC and LTSA agreements must be structured to reflect all regulatory obligations, performance requirements and project milestones from the outset. Given the significant penalties associated with delays or non-compliance, clear allocation of responsibilities is essential. A full-wrap EPC approach helps create a single point of accountability, while long-term operation and maintenance agreements ensure compliance with availability obligations throughout the 15-year commitment period. Effective risk allocation and contract management are therefore critical to project bankability and long-term success.
Key Takeaways:
- EPC and LTSA contracts must be aligned with all StromVKG requirements from day one;
- a full-wrap EPC structure provides clearer accountability and reduces contractual risk;
- long-term operational performance and availability are just as important as timely project completion.
Financing & Security Structures (Dr Stefan Kilgus)
Financing under the StromVKG framework requires a strong combination of contractual certainty, regulatory compliance and robust security arrangements. Project revenues are primarily driven by capacity remuneration, supplemented by energy market income. At the same time, developers must provide substantial securities covering bid participation, project realisation and future availability obligations. Lenders and investors will focus particularly on successful prequalification, project execution risk and the reliability of key project contracts such as EPC, LTSA, grid connection and fuel supply agreements. A well-structured financing framework is therefore essential to achieve bankability and attract capital.
Key Takeaways:
- successful prequalification is a key milestone for securing project financing.;
- StromVKG requires substantial security packages that must be reflected in financing structures; and
- bankability depends on the alignment of regulatory, contractual, technical and financing considerations.
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