Power: Reiche's New Energy Policy Course Shifts Control – Costly Gas-Fired Power Plants Drive Up Electricity Prices
Münster - The energy policy realignment planned by Federal Minister for Economic Affairs Katherina Reiche will lead to higher, not lower, electricity prices for industry and consumers, according to an analysis by the Internationales Wirtschaftsforum Regenerative Energien (IWR). If the expansion of renewable energy is slowed and retiring coal-fired capacity is increasingly replaced by gas-fired power plants, the high costs of gas-fired generation will increasingly determine the exchange electricity price going forward.
Gas-Fired Power Plants Increasingly Setting the Price
A widespread misconception holds that additional gas-fired power plants lower prices simply by increasing electricity supply. On the power exchange, however, the merit-order principle applies: in every auction, power plants are ranked according to their bids. The price paid to all dispatched plants is set by the last plant needed to meet demand, regardless of how cheaply the other plants bid. Because of their low marginal costs, more renewable energy displaces more expensive power plants, ultimately lowering the exchange electricity price. If renewable expansion is slowed, costly, price-setting gas-fired power plants will increasingly have to step in as coal-fired capacity is phased out.
Formation of electricity prices on the exchange: schematic illustration of the merit-order principle – © IWR
The current gas price illustrates how expensive gas-based power generation is at present. In mid-August 2026, the European TTF gas price stood at around EUR 62.50 per megawatt-hour. For a gas-fired power plant with 50 percent efficiency, this alone results in fuel costs of around 12.5 euro cents per kilowatt-hour of electricity. Storage systems, by contrast, can shift low-cost wind and solar power to hours of higher demand, reducing the need to dispatch expensive gas-fired plants.
"None of the planned new regulations from the grid package and the EEG amendment will result in lower electricity prices for industry and consumers – quite the opposite," said Dr. Norbert Allnoch, CEO of IWR.
Capacity Market Strengthens Secured Capacity – Renewables Bear Greater Risk
Under the planned capacity market, operators of secured power plant capacity would receive compensation for providing capacity in addition to potential revenue from the electricity market. For new wind turbines, by contrast, the risk of grid bottlenecks is to be shifted more heavily onto operators. The planned redispatch reservation clause would allow grid connection in exchange for forgoing financial compensation for later curtailment.
Market requirements are also rising for photovoltaics. Under the plans, new small rooftop PV systems would no longer receive the EEG minimum remuneration and would have to market their solar power themselves. Further changes are planned to the wind energy reference yield model, along with tighter limits on PV feed-in capacity. Battery storage systems would continue to face grid connection cost contributions.
"This is not forward-looking energy policy, but rather a shift in control of the energy transition toward actors and revenue models that are considerably less exposed to the cost pressure of a competitive electricity market – with far-reaching consequences," Allnoch said.
Electricity Prices: New Capacity Market Levy Adds Further Burden for Consumers
In addition to its impact on the exchange electricity price, the capacity market will create additional costs. Under current plans, its financing is to be covered by a new levy starting in 2031. The Federal Ministry for Economic Affairs estimates the cost of capacity support at EUR 1 billion to EUR 3 billion in 2031, to be borne by electricity consumers.
Reiche herself has not held out the prospect of near-term electricity price cuts. "We will not see noticeable relief until the 2030s," the Federal Minister for Economic Affairs said in early August.
IWR: Align the Power System Portfolio with Long-Term Viability and Lower Electricity Prices
In the IWR's view, energy policy should align the power system portfolio around the combination of renewable generation, storage, grids, flexible demand, and secured capacity that delivers supply security at the lowest possible electricity prices. One building block, according to the IWR, would be to make the combination of renewable energy and storage the standard for large tenders. This would allow low-cost wind and solar power to be stored and used during hours of higher demand, when expensive gas-fired power plants would otherwise more often set the electricity price.
Grid infrastructure is also changing. Under current plans, the Ultranet, A-Nord, SuedLink, and SuedOstLink lines - key north-south power connections - are to be completed by 2028. They will increase transmission capacity between renewable generation hubs in the north and consumption centers in the west and south, helping to reduce grid bottlenecks and the need for redispatch.
Allnoch: "It is the task of policy to actively align the power system portfolio with future viability – much like responsible portfolio management that weighs different opportunities and risks against one another. This includes robust grids and secured capacity as well as renewables, storage and flexible consumers. What matters is not only where investment is directed, but also who controls the system – and what electricity prices that entails for industry and consumers."
Source: IWR Online, 31 Aug 2026
