Press release

Letter to Commission: German Gas power plant plans remain incompatible with European State Aid laws

May 13th, 2026

Today, the draft law of the “StromVKG” passed the German cabinet. Before coming into effect, the law needs EU Commission approval, as it qualifies as State Aid. ClientEarth sent a letter to the EU Commission, as a follow-up to its complaint filed in November 2025. In the letter, the lawyers detail how the capacity remuneration mechanism (CRM) set out in the StromVKG is not aligned with key EU State Aid rules. If the European Commission greenlights the StromVKG in its current shape, the costs would be devastating – for the market, consumers, the environment and for the rule of law in Europe.

The German government spelled out its plans to spend billions of Euros on new capacities for the country’s power system, strongly favouring gas power plants, in the draft of the “Stromversorgungssicherheitskapazitätsgesetz” (StromVKG). Before the StromVKG can be rolled out, the subsidy scheme needs to be approved by the European Commission under EU State Aid rules. In November, ClientEarth filed a complaint against the anticipated approval of the government’s plans, known as the “Kraftwerkstrategie”. The plans have since been adapted in the StromVKG, but key concerns remain unresolved or have even worsened – harming competition in German and EU markets and displacing investments into cleaner alternatives.

The letter sent to the European Commission demonstrates that the StromVKG breaches several fundamental principles of EU law. Some of the most prominent are:

  • The volume of the tenders does not align with security of supply assessments: EU law requires these schemes to be grounded first in an assessment that shows additional capacities are in fact needed. Here, however, most of the capacities to be tendered are not tied to any assessment at all, and the rest are tied to a German assessment that diverges materially from the European one on key issues like the potential of batteries and demand side response. This all calls into question the need for the capacities to be tendered under the StromVKG.
  • Alternatives to guarantee security of supply have not been assessed: The proposed capacity mechanism is a costly and highly distortive measure to ensure security of supply and potentially more appropriate and less distortive measures seem to have been disregarded. These include amongst others a hedging obligation, administrative reserve scarcity pricing, full market access for demand-side response and aggregators, or removal of barriers to cross-border trade of electricity.
  • Several EU energy market laws are being breached: The proposed CRM in the StromVKG has not been preceded by a cross-border impact study, the implementation plan setting out other measures to address security of supply concerns is outdated and the CRM preempts the flexibility-needs assessment due by July 2026. Greenlighting despite these violations and those raised in our earlier complaint would severely harm the rule of law within the EU.
  • The scheme inherently favours large gas plants and incumbent market players over smaller, cleaner alternatives: Although the CRM is open to several technologies on the face of it, the eligibility requirements to participate in the tenders clearly favour large gas plants that will be built by large incumbent players. This is evident from the outright exclusion of demand-side response and small-scale plant pools, the requirement to be able to feed ten hours of electricity at any time after one hour, the derating factors for battery storage and the bid-ranking architecture in the long-term and generation tenders. Despite the principle that market competition should prevail, the StromVKG as it stands will be detrimental to a healthy distribution of market power and low consumer prices, while  hindering the transition to cleaner energy.
  • No actual decarbonisation requirements: Gas plants are only required to be “hydrogen-ready” by design, meaning that they do not need to be able to run on hydrogen but will need to be modified to do so to be “climate-neutral” by the end of 2045 only. Yet, the law does not require any credible pathway towards climate neutrality, does not have a mechanism to incentivise a conversion or to sanction the lack thereof, which exacerbates the risk of fossil gas lock in.

Stéphanie Nieuwbourg, lawyer at ClientEarth, concludes the findings of the letter: “Forcefully keeping Germany on a fossil fuel path – despite recent examples demonstrating how fragile this is for energy security – not only feels out of touch, but is also incompatible with EU law. Our legal analysis clearly shows that the StromVKG cannot be greenlit without breaching principles of EU State aid and energy market law that the EU states themselves set. These rules are in place to ensure proper market functioning for the benefit of consumers and a clear path towards a greener energy system. The EU commission cannot approve this detrimental plan and should instead launch an in-depth investigation into this State Aid measure.”

ENDS

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ClientEarth works in over 60 countries across Africa, the Americas, Asia-Pacific and Europe. We shape, implement and enforce the law, to build a future for our planet in which people and nature can thrive. 

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