State-sponsored oligopoly? Dangerous concentration of power: The Federal Cartel Office's alarming findings on the power plant law

Guaranteed billions for RWE & Co.: How the state is cementing the power of the energy giants

The power plant law as a state-subsidized oligopoly: When the state becomes a money-printing machine for energy giants

The planned Electricity Supply Security and Capacity Act (StromVKG) proposed by Federal Minister of Economics Katherina Reiche (CDU) is facing unprecedented opposition. Even the Federal Cartel Office has issued a rare and unequivocal warning: instead of promoting necessary competition, the draft legislation cements the market power of a few energy giants like RWE and EnBW. Tailor-made technical hurdles will systematically drive innovative, more affordable battery storage systems out of the market in favor of fossil gas-fired power plants – a process apparently designed with the direct involvement of corporate lobbyists. While subsidies for renewable energies are being drastically cut at the same time, consumers face the prospect of a costly new electricity surcharge to subsidize long-established corporations. It's an energy policy thriller involving billions of euros, explosive conflicts of interest, and the question of who will ultimately foot the bill for the future of the German electricity market.

Former CEO makes the laws: The explosive conflict of interest in the Ministry of Economic Affairs

The 10-hour trick: How energy giants are slowing down the storage revolution at our expense

Rarely has a federal agency so unequivocally criticized a draft law from its own government as the Federal Cartel Office did the so-called Electricity Supply Security and Capacity Act (StromVKG) proposed by Federal Minister of Economics Katherina Reiche (CDU). The competition watchdog felt compelled, not once, but for the second time in its history, to publicly warn of the consequences of a legislative proposal that not only preserves existing market power structures but virtually cements them. Anyone who takes the trouble to examine this law and its political genesis closely will discover a disturbing pattern: a regulatory construct that ostensibly serves security of supply, but in effect secures state-guaranteed revenue streams for a small circle of established energy companies – financed by a new levy on the electricity price, which all consumers are expected to pay.

Alarm signal from Bonn: What the Federal Cartel Office is really criticizing

On May 6, 2026, the Federal Cartel Office published its second statement on the Power Plant Act, leaving nothing to the imagination. The authority concluded that the planned regulations would not prevent existing, anti-competitive market structures from becoming further entrenched. This is an exceptionally strong statement for a federal agency, and essentially means that the legislature simply ignored the competition authorities' warning from December 2025.

Specifically, the Federal Cartel Office criticizes two structural deficiencies in the draft legislation. First, the draft contains no limit whatsoever on the awarded capacity per bidder. As early as December 2025, the Cartel Office had explicitly called for a capacity cap of ten percent of the total tendered capacity per bidder to ensure supplier diversity and counteract any strengthening of existing market power in the electricity generation market. This recommendation was simply ignored in the new draft. Second, the Cartel Office criticizes the requirement that applicants for the tenders must already have an existing or bindingly committed grid connection. This requirement effectively favors existing power plant sites, as new sites that have not yet been applied for and approved would have no realistic chance of receiving a grid connection commitment within the stipulated application period. This regulation particularly affects battery storage projects, which could, in principle, be realized by 2031 even without a prior grid connection commitment, as they have significantly shorter construction times compared to gas-fired power plants.

The Federal Cartel Office explicitly points out that coal-fired power plant sites and former nuclear power plant sites, in particular, are owned by a limited number of electricity generation companies. If access to state subsidies is now tied to these sites, this automatically results in an advantage for the dominant corporations over new market entrants and innovative technology providers.

Dangerous concentration of power: The market power report as an early warning

It is no coincidence that the Federal Cartel Office is observing the Power Plant Act with such great concern. As early as February 2026, the authority published its sixth market power report on competitive conditions in electricity generation – and the results were alarming. Andreas Mundt, President of the Federal Cartel Office, commented on the findings unequivocally: The market power of the leading electricity producers in Germany – RWE, LEAG, and EnBW – has increased considerably. This is primarily due to the significant decline in dispatchable generation capacities available on the market.

The German Federal Cartel Office measures market power based on so-called pivotal hours: these are the hours in which a single electricity producer is indispensable for meeting total demand. If the share of such hours exceeds a threshold of five percent of all annual hours, this indicates a dominant market position. According to the latest results, RWE was significantly above this threshold, with pivotal hours between 4.3 and 11.1 percent of annual hours. LEAG also exceeded the threshold, with values ​​between 1.9 and 7.6 percent. EnBW, with 0.9 to 4.1 percent pivotal hours, was very close to the critical mark. The decisive trigger for the increase in these figures was the regulatory-driven decommissioning of numerous dispatchable power plants at the beginning of 2024 – overall, conventional capacity shrank by 14.1 gigawatts in 2024. With the loss of this capacity, the few remaining suppliers with dispatchable power plants are simply irreplaceable for many hours of the year.

The consequences of this concentration are economically devastating: power plant operators can significantly influence wholesale electricity prices even with comparatively small market shares. They enjoy pricing power that would be impossible in a functioning competitive market. Therefore, if a new law is passed precisely in this situation, systematically hindering market access for potential competitors, it is not a reckless overreaction – it is a deliberate decision with foreseeable distributional effects.

The 10-hour rule: A technical paragraph with strategic impact

No other detail of the power plant law illustrates its true purpose as aptly as the so-called 10-hour rule. According to Section 12, Paragraph 5 of the draft bill, applicants for so-called long-term capacities must be technically capable of feeding electricity into the grid at least for ten consecutive hours without interruption, at the level of their installed capacity. This requirement is supplemented by a one-hour refill period.

At first glance, this sounds like a straightforward technical requirement intended to ensure security of supply – after all, periods of low wind and solar energy production can last for several days. However, the combination of requirements creates a highly specific exclusionary effect: While modern-generation battery storage systems could theoretically meet the ten-hour criterion, the requirement of a one-hour recharge cycle makes construction economically impossible because it demands a power output many times greater than the discharge power. Leonhard Gandhi of the Fraunhofer Institute for Solar Energy Systems ISE described the rule as arbitrarily chosen to pre-select a range of technologies.

Even more revealing is who was involved in this regulation. Investigations by the news magazine "Der Spiegel," published in April 2026, showed that the Federal Ministry for Economic Affairs and Energy had explicitly asked EnBW's chief lobbyist, Holger Schäfer, to develop arguments for supplementary criteria to the 10-hour rule—arguments intended to disadvantage battery storage systems in the tenders. EnBW itself confirmed that the corresponding text message had been drafted at the ministry's request. The matter did not appear in the lobby register for months and was only added after a media inquiry. Battery storage operators, on the other hand, were never contacted.

In plain terms, this means that the ministry allowed the very corporation that profits from these tenders to design the technical criteria for a state tendering mechanism that will involve billions of euros in taxpayer and consumer money. This is not a minor oversight of transparency. It is the structural instrumentalization of a regulatory process by private special interests.

A market design that prevents competition

The basic architecture of the Electricity Supply and Distribution (ESD) system is that of a capacity market: power plant operators receive payment not only for electricity generated, but also for their mere willingness to supply electricity when needed. This principle is familiar from other European markets. Comparable models exist in Great Britain and Italy. However, the crucial difference to a well-functioning capacity market lies in its design: who is allowed to participate, under what technical conditions, and whether there is a limit per bidder.

The Electricity Supply Act (StromVKG) envisages launching tenders for a total of eleven gigawatts of capacity in 2026, with two award rounds in September and December. Ten gigawatts of this capacity are explicitly linked to the long-term criterion, which, given the technical design, effectively means ten gigawatts for gas-fired power plants. Only two gigawatts will be tendered without regard to technology, meaning they are also available for battery storage. The subsidized capacity is intended to be available for 15 years starting in 2031.

For power plant operators fortunate enough to have access to old coal or nuclear power plant sites with existing grid connections, the Electricity Supply Act (StromVKG) is an exceptionally attractive business model. State-guaranteed revenues for 15 years simply for providing capacity. Those entering the market without this structural advantage—a new player, an innovative storage provider, or a smaller municipal utility—have virtually no chance under current conditions. The Federal Cartel Office has pointed out that the draft legislation thus misses the opportunity for a more competitive market design.

Our EU and German expertise in business development, sales and marketing - Image: Xpert.Digital

Industry focus areas: B2B, digitalization (from AI to XR), mechanical engineering, logistics, renewable energies and industry

More information here:

• Expert Business Hub

A thematic hub offering insights and expertise:

• Knowledge platform covering global and regional economies, innovation and industry-specific trends
• A collection of analyses, insights, and background information from our key areas of focus
• A place for expertise and information on current developments in business and technology
• A hub for companies seeking information on markets, digitalization, and industry innovations

The hidden bill: Who pays for the capacity market?

The financial dimension of this law should not be underestimated, even though the federal government has so far masterfully kept it vague. The costs for the capacity market are to be financed through a new consumer levy, which is to be introduced in 2027 and collected from 2031 onwards. According to the Ministry of Economic Affairs, it is not yet able to estimate how high this levy will be.

This uncertainty is politically convenient: The decision is made today, the bill only arrives after the next federal election. However, there are already initial estimates from the industry: Trade publications are already discussing a capacity surcharge of up to two cents per kilowatt-hour. For an average German household with an annual consumption of 3,500 kilowatt-hours, this would mean an additional burden of up to 70 euros per year – and that for decades, regardless of whether the new power plants actually operate.

The European legal framework stipulates that capacity mechanisms must be financed through levies. The Federal Cartel Office had already warned in a previous statement on a Green Paper from the then Ministry of Economic Affairs of significantly higher system costs and corresponding burdens for consumers if a capacity market were introduced. The current electricity price for residential customers at the beginning of 2026 is around 37.2 cents per kilowatt-hour – after a temporary decrease thanks to government subsidies for transmission network charges. A new structural levy, which would take effect from 2031, would permanently raise this level without consumers receiving any direct benefit in the form of lower base electricity prices.

Renewables scrapped, fossil fuels subsidized: The double game of energy policy

The contradiction becomes particularly stark when the Electricity Supply Act (StromVKG) is not considered in isolation, but in the context of the simultaneous reform plans for the Renewable Energy Sources Act (EEG). While the Power Plant Act provides for new, multi-billion-euro subsidies for gas-fired power plants, the Ministry of Economic Affairs is simultaneously planning massive cuts in the promotion of renewable energies.

Specifically, Economics Minister Reiche plans to abolish the fixed feed-in tariff for new installations as the future support scheme and to completely eliminate compensation during periods of negative prices. The guaranteed feed-in tariff for new small solar installations up to 25 kilowatts is to be completely eliminated for installations from 2027 onwards. Chancellor Friedrich Merz has explicitly supported these plans. While the 2026 federal budget still allocates €17.2 billion for EEG financing, the political course is clear: the established support structure for renewable energies, built up over two decades, is to be weakened. At the same time, a new support structure for conventional, dispatchable capacities is being established – without cost transparency and without effective protection of competition.

It is a fundamental shift in energy policy, officially operating under the banner of technological neutrality, but in reality making a clear technological decision: for gas, against batteries; for established companies, against new market players; for state-guaranteed returns on existing plants, against market-based investment incentives for the energy future. In this context, the framing of technological neutrality is not only inaccurate, but downright misleading.

The conflict of interest in office: The wealth question

No report on the Electricity Supply Act (StromVKG) would be complete without considering the biographical dimension of the current Minister for Economic Affairs. Katherina Reiche (CDU), who took over the Federal Ministry for Economic Affairs in the fall of 2025, has an exceptional career history. After almost two decades in the Bundestag, most recently as Parliamentary State Secretary in the Federal Ministry for the Environment, she moved to the Association of Municipal Enterprises (VKU) as Managing Director in 2015. From 2020 until her appointment as Minister in 2025, she was CEO of Westenergie AG – the largest subsidiary of the E.ON Group, with around 10,000 employees.

This situation is not trivial for an economics minister who decides on the framework of the German energy market. The "Spiegel" report on the lobbying documents from EnBW and RWE highlighted the ministry's practice of specifically requesting argumentation support from energy companies. At the same time, providers of alternative technologies, particularly battery storage systems, were not consulted. The non-profit organization LobbyControl criticized Reiche for repeatedly relying unilaterally on the perspective of the gas companies and called on the Bundestag administration to consider imposing a fine for violating the lobby register requirement.

The question of conflict of interest is not a moral speculation, but a regulatory and institutional challenge. A minister who led E.ON's largest subsidiary for five years is now shaping the funding conditions for the very industry whose players she knows well personally. This does not inherently preclude unfair decisions, but it creates a close relationship that requires explanation – and whose structural consequences are evident in the current draft legislation.

Systemic comparison: How Europe is doing better

It would be unfair to dismiss the concept of a capacity market outright as a mistake. In an energy system increasingly dominated by fluctuating renewable energies, mechanisms are indeed needed to maintain controllable reserve capacities and secure their financing. The question is not whether, but how such a mechanism should be designed.

A look at Great Britain shows that a capacity market can indeed function in a competitive manner: there, gas-fired power plants, pumped storage, demand-side flexibility, and increasingly also battery storage participate in the tenders on an equal footing. Technological exclusion criteria that systematically keep individual solutions out of the competition do not exist in this form. The model of a decentralized, certificate-based capacity market, favored by various economists and modeled on the French system, also relies on broader competition.

What distinguishes the German Electricity Supply Act (StromVKG) from these models is the combination of three problematic features: the lack of a capacity cap per bidder, the technical exclusion criteria for battery storage, and the grid connection requirement, which structurally disadvantages newcomers. The sum of these regulations is not an oversight, but rather the result of a legislative process in which the beneficiaries were actively involved.

Structural consolidation: What's at stake

The long-term consequences of the Electricity Supply Act (StromVKG), if it is adopted in its current form, can be described in three dimensions.

First, and most directly: the market structure. A capacity market that favors existing players will not only stabilize their market power but also firmly anchor it in the system over the long funding period of 15 years. RWE, LEAG, and EnBW, which already hold a dominant or near-dominant market position, will receive state-guaranteed revenue streams that will cement their economic and political position for a generation.

Secondly: the dynamics of innovation. Battery storage is not the future – it is the present. Modern large-scale battery storage systems are now cheaper than gas-fired power plants for many hours of the year, and their capacities are increasing rapidly. If Germany, through regulatory decisions, pushes this technology out of the state-subsidized capacity market, it will not only miss an economic opportunity – it will force the energy market into a fossil fuel dead end that is incompatible with the 2045 climate targets.

Thirdly: the consumers. They not only pay directly through the new capacity levy starting in 2031, but also suffer indirectly from the reduced competitive intensity in the electricity generation market. Where there is a lack of supplier diversity, there is also a lack of price pressure. The Federal Cartel Office clearly stated this in its market power report: power plant operators can significantly influence market prices if they are indispensable during crucial hours. A law that permanently guarantees this indispensability is not a security of supply policy – ​​it is an oligopoly policy with economic damage.

The credibility problem of German energy policy

In 2026, Germany stands at a crossroads in its energy policy. The phase-out of coal is progressing, and the need for controllable replacement capacities is real. No one disputes the need to guarantee security of supply. However, the way the Electricity Supply Act (StromVKG) was designed reveals a deep structural problem in German energy regulation: the tendency to resolve complex market design issues in close coordination with the corporations being regulated – neglecting the principles of competition, consumer interests, and openness to innovation.

A Federal Cartel Office that twice in a row criticizes the same draft law while being ignored on key points is an indicator of a disrupted regulatory balance. A minister who led the board of one of the largest subsidiaries of the German energy oligopoly for five years and is now shaping the tender conditions for that very market is an indicator of an institutional conflict of interest problem that must be taken seriously. And a law that systematically excludes cheaper, cleaner, and more innovative technologies from competitive funding while simultaneously eliminating feed-in tariffs for solar energy is not a sign of technological neutrality—it is the opposite.

German electricity and heating consumers will pay the price for this policy decision for many years to come – in the form of a new levy, structurally higher market prices, and missed opportunities for innovation. What is truly astonishing is not that powerful corporations are exerting their influence – that's a constant in economic history. What is truly astonishing is that this influence is being so transparently, so clearly documented, and so openly enshrined in a law that purports to serve the common good.