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Glossary · Energy industry & energy transition

Firm Capacity

firm capacity Firm capacity security of supply Capacity market power system generation storage flexibility

Firm capacity refers to the share of a generation plant, a storage unit, a controllable load or a portfolio that can reliably contribute to meeting electricity demand in critical supply situations. In German this is usually called secured capacity (gesicherte Leistung) or creditable capacity (anrechenbare Leistung). What is meant is capacity (power), not annual energy. It is therefore measured in kilowatts, megawatts or gigawatts and not in kilowatt-hours.

This distinction is fundamental for the power system. A plant with 100 megawatts of installed capacity does not automatically have 100 megawatts of firm capacity. A gas-fired power plant can be unavailable because of a technical fault, lack of fuel or maintenance. A wind turbine only delivers when there is sufficient wind. Photovoltaics generates a lot of power during the day but contributes little to the evening winter peak load. A battery storage system can deliver its rated power very quickly but is limited by its energy content. An industrial facility that can shift its electricity consumption only has firm capacity if the reduction can actually be called upon in the critical hour contractually, technically and organisationally.

Firm capacity is therefore not a permanent physical state of a plant. It describes a probable contribution in specific scarcity situations. For this reason the concept is closely linked to security of supply, to flexibility and to the design of capacity mechanisms.

Distinction from installed capacity, energy and availability

Installed capacity is the technical rated power of a plant. It indicates the maximum electrical power that can be delivered or absorbed under suitable conditions. Firm capacity asks a different question: which part of this capacity may be counted when assessing security of supply?

The amount of energy generated or consumed over a year is likewise not firm capacity. A wind turbine can generate a lot of electricity over a year and still contribute little during a high-load period with little wind. Conversely, a power plant that rarely runs and has low annual output can have a high capacity value if it is reliably available in scarcity hours. Annual energy describes energy, whereas firm capacity describes secured capacity in the decisive hours.

The capacity factor is also not the same as firm capacity. It indicates the ratio of actual annual generation to the theoretically possible generation at full load. A high capacity factor points to frequent use. However, it does not directly say whether the plant is available in the tightest hours. For security of supply, what matters is how well generation and demand match in time. Wind power is particularly valuable when it occurs in hours of high residual load. Solar power barely helps with the evening peak when the sun has already set.

The technical availability of a power plant is only one aspect. A conventional power plant can be technically ready for operation and still not feed in to the expected extent, for example because of missing fuel deliveries, scarce cooling water, emission restrictions or grid bottlenecks. If firm capacity is to serve as a robust metric for planning or market rules, it must take such boundary conditions into account.

How firm capacity is assessed

In practice, firm capacity is often determined using derating factors (in German: Anrechnungsfaktoren). Such a factor indicates what share of a resource's installed capacity counts towards security of supply. If 1,000 megawatts of a technology are credited at 20 percent, the result is 200 megawatts of firm capacity. In the British capacity market, such factors are set per technology and recalculated regularly. For storage, they explicitly depend on the discharge duration.

Behind this simple percentage calculation there is a probabilistic model, or at least there should be one. For weather-dependent generation, historical weather years, load profiles and regional correlations are analysed. For power plants, outage probabilities, maintenance periods and operating conditions are factored in. For storage, the state of charge, energy content, charging power, discharge duration and the question of whether enough electricity is available for recharging are added. For demand flexibility, controllability, lead times, the maximum duration of the reduction and possible rebound effects matter.

More precise metrics are the capacity credit and related measures. The Effective Load Carrying Capability (ELCC) indicates how much additional load a system can carry when a particular resource is added, without the targeted reliability level falling. Closely related is the Equivalent Firm Capacity (EFC). It indicates how much fully reliable capacity would have the same effect on security of supply as the resource being assessed. The British grid operator derives the derating factors for storage with limited discharge duration from this approach. Both measures show that firm capacity is not a fixed property of a technology. It depends on the rest of the generation fleet, the load profile, the grid, the correlation of weather conditions and the other flexibility options.

An example: in a system with peak loads at summer midday, photovoltaics can have a high capacity value. If the critical hours fall on winter evenings, this value is considerably lower. With very strong PV expansion, additional plants contribute less and less to security of supply because they all generate at the same time and are all unavailable at the same time. For wind power the same applies in a similar form when large-scale weather patterns reduce feed-in in several regions simultaneously. The same effect applies to storage: the more storage capacity a system already has, the wider the time window that additional storage would have to cover becomes, and its creditable contribution can fall.

Significance for security of supply and market design

Firm capacity is needed to check whether enough capacity is available in rare but critical hours. Such hours do not show up in the annual average. They usually arise when several factors coincide: high demand, little wind and solar power, power plant outages, limited import possibilities and grid bottlenecks. What then matters is not how much electricity can be generated on average over the year, but which resources reliably contribute in precisely these situations.

The concept is also important for market design. In a pure energy market, plants earn mainly from kilowatt-hours sold and from high scarcity prices in tight hours. If price caps limit scarcity prices or investment risks become too high, secured capacity is harder to finance. Capacity mechanisms such as capacity markets, capacity reserves or strategic reserves are therefore intended to remunerate separately the availability contribution of plants or loads. For this, it must be determined how much firm capacity a resource has and what the consequences are if it does not deliver in the critical hour.

A central incentive follows from this: whoever is paid for firm capacity is not selling installed megawatts but an availability commitment. This commitment requires measurement rules, proof obligations and liability. Without such rules, payments may be made for capacity that is only of limited use in scarcity situations. Rules that are too strict, on the other hand, can exclude flexible resources that would help in practice.

Legal framework in the EU and in Germany

In the EU, the Internal Electricity Market Regulation (EU) 2019/943 governs capacity mechanisms. It defines a capacity mechanism as a temporary measure intended to ensure the necessary level of resource adequacy by remunerating resources for their availability. Ancillary services and congestion management are not covered. A Member State applying a capacity mechanism needs a reliability standard. This sets out transparently the level of security of supply that is aimed for. The Commission approves such mechanisms for a maximum of ten years.

Under the regulation's design principles, capacity providers must make payments if their capacity is not available. The availability commitment behind firm capacity thus has a legal basis. At the same time, the regulation stresses that scarcity prices and short-term markets are meant to support security of supply and that capacity mechanisms are used only for a limited period.

In Germany, the Electricity Security of Supply and Capacity Act (Strom-Versorgungssicherheits- und Kapazitätengesetz, StromVKG) entered into force on 22 July 2026. According to the Federal Government, it introduces a capacity market intended to cover the need for secured supply from 2031. Within twelve months, a total of eleven gigawatts of controllable capacity is initially to be put out to tender, with further tenders planned for 2027 and 2029. Whoever receives an award must demonstrably deliver the committed capacity at relevant times. How exactly the capacity market is to be regulated and financed is to be determined by a further law, expected in 2027.

A long-duration criterion applies to the first two tender rounds in 2026, of 4.5 gigawatts each. It is intended to ensure that even long periods of weak wind and solar feed-in, that is, a Dunkelflaute (prolonged low-wind, low-sunlight period), can be bridged. New hydrogen-ready power plants and electricity storage can participate. In addition there are two gigawatts of technology-neutral tenders without the long-duration criterion. According to the Federal Government, the rounds from 2027 are also to include existing plants, batteries and flexible loads. This shows how closely firm capacity is tied to sustained delivery capability: how long a resource can deliver helps decide which product it is eligible for.

Storage, flexible loads and portfolios

With storage it becomes particularly clear that firm capacity is not only a question of power. A battery storage system with 100 megawatts of power and 200 megawatt-hours of energy content can deliver 100 megawatts for two hours. For a short evening peak this is very valuable. Over a multi-day Dunkelflaute, however, the same storage unit cannot provide full-value replacement capacity. Its firm capacity depends on how long critical events typically last, whether the storage is charged beforehand and whether it can recharge between several scarcity phases. For this reason, storage in capacity markets such as the British one is credited in tiers according to its discharge duration: short-duration storage with a low factor, long-duration storage with a considerably higher one.

Flexible loads behave similarly. If a data centre, an electrolyser, a heat pump with a buffer tank or an industrial process can reduce its electricity consumption in critical hours, this acts for security of supply like additional generation capacity. However, this effect is only robust if the flexibility is not already committed elsewhere, if comfort and production limits are observed and if the control system actually responds. A load that can only be shifted in theory is not firm capacity.

Portfolios can make a higher or more stable contribution than individual plants because outage risks, weather profiles and load shifts partly offset one another. A portfolio of wind, solar, battery storage, controllable power plants and demand flexibility has different properties from the sum of the individually considered rated capacities. In the assessment, however, dependencies between the resources must be taken into account. If many resources are unavailable under the same weather conditions or have to charge at the same time, their combined capacity value is lower than simple addition would suggest.

Typical misunderstandings

  • Weather-dependent generation has no firm capacity: this is technically inaccurate. Wind and solar energy can contribute to security of supply, but their creditable contribution depends on the situation and is usually well below installed capacity. Geographical spread, complementary storage, grid expansion and flexible loads can increase it.

  • Installed capacity equals secured capacity: thermal power plants also do not deliver with one hundred percent certainty. Outages occur, fuel and cooling water can become scarce, and a common cause can affect several plants at the same time. Planning that credits conventional capacity in full and discounts variable generation across the board assesses the risks unequally.

  • Firm capacity is a guarantee: the concept works with probabilities and reliability standards. Metrics such as the expected number of hours with loss of load (LOLE) or the expected energy not served (EENS) determine what residual risk is accepted. Security of supply does not mean that every conceivable combination of outages, weather extremes and demand peaks is handled without restriction.

Firm capacity describes what capacity is actually supposed to be available in critical hours. The concept makes clear that a power system cannot be measured by installed megawatts or annual terawatt-hours alone. For planning, market rules such as a capacity market and political debates, what counts is the reliable contribution of a resource under precisely the conditions in which scarcity arises.

Sources

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Edited by eCMS on 11.11.2026 19:47

© 2026 Erik Schmidt. All rights reserved. Quotations with a link to the source are welcome.