Germany's capacity market is now ready to be law. The lower house of parliament, the Bundestag, passed the Strom-Versorgungssicherheits- und Kapazitätengesetz (StromVKG) on 9 July 2026. The upper house (Bundesrat) cleared it a day later, leaving only official signatures for it to enter into force. It creates a centralised, auction-based capacity market for delivery from 2031. A permanent market will follow from 2032.

This largely confirms the government's previous intent: separate strands of capacity for long-duration and all other generators. Batteries can compete. But not everywhere, and not in the biggest auction.

The law runs three types of auctions: a first long-duration auction, then a smaller one for newbuild generation capacity, and finally two open capacity auctions with larger volumes. BESS can bid in the 2027 generation auction and the 2027 and 2029 capacity auctions, where de-rating is model-based and differentiated by duration. But batteries are effectively shut out of the first and larger auction in 2026. The government intentionally shapes these auctions to favour newbuild gas, by requiring multi-day, repeatable output that no battery can deliver. On price alone, a 13-hour battery would already undercut gas.

Key takeaways

• Germany will procure long-duration capacity (9 GW, 2026, 15-year contracts), newbuild generation capacity (2 GW, May 2027), and general capacity (volume set by the regulator, December 2027 and October 2029). Delivery starts November 2031.
• The open auctions use model-based de-rating. The regulator derives each technology's capacity credit from a probabilistic scarcity model, rather than administratively. The methodology so far seems beneficial to mid-duration BESS, but the modelling itself is not public yet.
• Batteries are excluded from the 2026 long-duration auction by a duration rule, not by economics. Units must sustain 10 hours at 80% of rated power and restore that ability within 3 hours, at any time. Batteries with symmetrical charging and discharging power cannot deliver this.
• On price, a battery would compete with gas. A 13-hour BESS would bid €150,000 to €190,000/MW-year based on Modo Energy’s Jul-26 forecast model. Parliament just raised the bid cap for gas units to €244,000/MW-year, partly to allow them to be hydrogen-ready. Slicing an existing battery could be clever in theory but may be harder in practice, with a legal grey area around the prequalification.

Five auctions, three types, one delivery year

The StromVKG splits procurement into three products, all for the 2031/32 delivery year.

Long-duration capacity comes first. Two auctions run in 2026, on 8 September and 29 December, for 4.5 GW of de-rated capacity each. Contracts last 15 years. Only new generation on qualifying sites can bid, and demand-side response cannot.

The generation auction follows on 18 May 2027, for 2 GW. It opens to all newbuild generation, including storage of all durations, on 15-year contracts.

The capacity auctions come last, on 1 December 2027 and 1 October 2029. Here, the regulator sets the volume from its supply-security monitoring. New and existing generation, storage and demand-side response all compete, on one-, seven- or fifteen-year contracts.

Batteries can bid from May 2027

The first auction open to batteries is the generation auction (Ausschreibung für Erzeugungskapazitäten), on 18 May 2027. It procures 2 GW of de-rated capacity in a single round. Every generation technology can bid, storage included, but demand-side response cannot. There is no 10-hour endurance gate here, so a two- or four-hour battery qualifies.

Awards run for 15 years only. That brings three strings: a minimum investment of €431,000 per de-rated MW, an inertia obligation for any unit of 10 MW or more, and a new-build requirement on qualifying sites. The bid cap matches the long-duration auction at €244,000/MW-year.

After the 2 GW for new-build generation, two capacity auctions (Ausschreibungen für Kapazitäten) follow, on 1 December 2027 and 1 October 2029, still for delivery from 2031. The regulator sets their size from its supply-security monitoring, so the volume is not yet fixed. The 2027 round covers 75% of the assessed need, and the 2029 round tops it up to the full requirement (with any unauctioned capacities from the previous round). Both are open to generation, storage and demand-side response, on 1, 7, or 15-year contracts. A one-year contract sheds the minimum investment requirements that are still active for 7- and 15-year contracts, letting batteries strategise around degradation and stacking of contracts.

Everything clears pay-as-bid, priced per de-rated MW, like Belgium’s and Spain’s capacity markets but different from GB or Italy. The regulator ranks bids from the cheapest, awards up to the volume, and pays each winner its own bid value.

In the capacity auctions, a scarcity model sets de-rating

The long-duration auction hard-codes its de-rating factors. The generation and capacity auctions do not. The regulator derives them from a probabilistic model of the power system, together with the auction volumes, and publishes them at least six weeks before each round.

The method measures how much a technology marginally generates during the exact hours the system falls short, relative to its rated power. A firm gas plant scores near its availability, above 85%. Wind and solar score in low single digits. Storage sits between, and its factor climbs with duration, calculated hour by hour.