Germany's Power Plan Reserves Face Potential Market Rejection and Financial Dilemma
In a recent webinar, Dr. Alsheimer, CEO of Thüga, expressed concerns about the use of power plant reserves in Germany for price stabilization. According to Dr. Alsheimer, this practice could lead to significant price increases and increased CO2 emissions.
The study presented in the webinar suggests that the planned use of power plant reserves could result in price increases of up to 9 percent in the medium term. Moreover, it could potentially become a market distortion and cost trap, negatively affecting new business models based on smoothing out price volatility through storage.
The use of power plant reserves has contributed to increased uncertainty for new power plant capacity investments in Germany. This uncertainty arises as reliance on existing thermal power plants, including those held as reserves, tends to disincentivize new capacity builds and supports continued fossil fuel use.
This trend is evident in the statistics. Germany's fossil fuel share increased from 37% to 40% in early 2025 as the renewable share slightly decreased (63% to 60%). This shift, accompanied by improving coal-fired power margins amid rising electricity prices (~€95.72/MWh), indicates greater usage of coal reserves contributing to higher prices and emissions.
Grid operators face challenges balancing supply and demand amid volatility. While renewables supply a growing share, the firm and flexible capacity from fossil fuel plants remains crucial for price stability but creates investment uncertainty for new power plants, especially clean ones.
Rising electricity demand and infrastructure bottlenecks, such as transformer shortages, threaten expansion and modernization of the grid. This complicates integration of new capacity and renewable energy sources, creating a risk of continued fossil fuel reliance and price increases.
Extreme weather events, like the 2025 European heatwave, exacerbate these issues. Increased demand spikes and thermal plant outages caused daily power prices to rise two- to threefold, underlining the system's sensitivity to reserve capacity availability and its effect on prices and emissions.
Dr. Alsheimer advocates for more legal, planning, and investment security for the addition of new gas power plants. He believes that addressing transformer shortages, expanding grid infrastructure, and scaling renewable storage are vital to easing the tension created by the use of power plant reserves for price stabilization.
Thüga, the core of the largest network of municipal energy and water suppliers in Germany, offers consulting, shares best practices, promotes scalable solutions, and fosters cooperations. With around 27,000 employees, it is the third-largest employer among German energy suppliers. Thüga is the number one in water supply nationwide, one of the largest heat suppliers in Germany, and the largest operator of charging infrastructure for e-mobility. It is involved in renewable energy plants with a total capacity of almost 5 gigawatts.
The study titled "The use of network reserves for price stabilization - impacts on the power supply system" is being presented for the first time in a webinar. The public is invited to learn more about the impacts of power plant reserve use on the power supply system at this link.
The goal of Thüga is to shape municipal energy and water supply securely, sustainably, and affordably. The coalition agreement commits CDU, CSU, and SPD to an affordable and citizen-friendly energy transition in Germany. Thüga's concerns about the use of power plant reserves for price stabilization align with this commitment, as the practice could potentially result in an extra 2 million tons of CO2 emissions.
For more information, please contact Dennis [email protected] or visit Thüga on LinkedIn at this link.
- The use of power plant reserves for price stabilization, as discussed in the presented study, could potentially lead to increased finance costs for new business models in the energy industry that aim to smooth out price volatility through storage, due to the potential market distortion and cost trap.
- The energy sector could experience a significant shift if power plant reserves are extensively used for price stabilization, as suggested by the study, given that it could potentially lead to price increases of up to 9 percent, increased CO2 emissions, and prolonged fossil fuel use, thus hindering thetransition to cleaner and carbon-neutral sources.
