Danger of German renewable energy slow-down as governing coalition collapses
As Scholz kicks Liberals out of government, conservative opposition leader Merz – whose party wants more market-driven approach to energy transition – is the likely winner of new elections
Just as the European renewables industry struggles to come to terms with a second US presidency under wind-hater Donald Trump, more dark clouds are on the horizon for the energy transition after the sudden break-up of Germany’s ruling coalition.
Chancellor Olaf Scholz after months of alienation between his Social Democrats (SPD) and the Greens on one side, and the neo-liberal Free Democrats (FDP) on the other, last night sacked FDP finance minister Christian Lindner, whose ideas about how to revive Germany’s stagnant economy and find sufficient funds for next year’s budget clashed head-on with those of the more left-leaning SPD and Greens.
In consequence, two other FDP ministers have resigned, one is leaving the party to remain in office, and Europe’s largest economy for an interim period will be ruled by an SPD-Green minority government. Scholz said he plans to ask for a vote of confidence in January, which presumably he will lose, to clear the way for new elections in March. The opposition is demanding a faster vote of confidence, but constitutionally can’t force Scholz to do that.
As Scholz’s outgoing administration most likely will be unable to push any important legislation through parliament and the election campaign practically is starting now, a period of uncertainty will reign for the next couple of months, which is never good for business and could prompt companies in the green power sector to postpone investments.
Scholz’s three-way coalition (despite constant infighting) under the leadership of Green Party economics and energy minister Robert Habeck had pushed through a flurry of laws and regulations to unblock a previously paralysed renewables expansion.
That new dynamism is in danger now.
Opposition leader will need coalition partners
While the exclusion of the FDP from government for the time being averts such as scenario, a weakening of current pro-renewables policies could be on the cards.
If current opinion polls were to remain more or less stable until a possible March election date, a victory of the conservative Christian Democrats (CDU) and their Bavarian allies, the Christian Social Union (CSU), under CDU leader Friedrich Merz as new chancellor is most likely.
But Merz, whose CDU/CSU currently stands at around 32-34% in opinion surveys, would need either the SPD (at 13-16% in opinion polls) or the Greens (around 10-11%) to form a government. The FDP currently may not even garner enough votes to surpass the 5% threshold to enter parliament.
If the two populist parties do well in the coming election, Merz may even need to build a coalition with both the SPD and the Greens, a set-up tested in some Eastern German states in recent years that led to instability and a further strengthening of the extremist parties.
Conservative paper on energy
As if sensing that the end of Scholz’s government was near, the CDU/CSU parliamentary group earlier this week presented a ‘position paper on energy policy’. In it, the party demands a return of Germany to nuclear power, a backing of nuclear fusion technology, the use of blue hydrogen (produced from natural gas linked to carbon storage), and a retraction of a recently passed heating law that intends to phase out gas boilers.
But the paper also includes a commitment to Germany’s climate targets and the consideration of the entire spectrum of renewable technologies, including bioenergy and geothermal.
Simone Peter, president of Germany’s renewable energy federation (BEE), welcomed the CDU/CSU’s commitment to climate targets and the expansion of renewable energy in principle, but demanded that “the new momentum that the driving forces of wind and solar energy are currently experiencing again must be maintained and secured.”
The BEE also rejected the import of blue hydrogen and instead lobbies for overwhelmingly using domestic green hydrogen (produced via electrolysers from renewable power), which it said relieved the strain on grids and increased cost efficiency in the market integration of renewables.
The paper is unclear about how exactly this should be performed, and the current government has already carried out some of those points, for example through zero-subsidy tenders in offshore wind.
Looking at the somewhat vague energy paper and the CDU/CSU’s track record in energy policy, it can be assumed that the expansion of wind and solar power probably wouldn’t stall entirely in Germany under a Merz government, but a slowdown is likely.
(Copyright)Reaction of German renewable energy groups on the coalition break-up
Dennis Rendschmidt, managing director of VDMA Power Systems, a group representing wind OEMs and suppliers:
“A stable, high demand in the market and thus planning security is crucial for manufacturers and suppliers. This is the only way to make the necessary investments in sustainable industrial growth. Therefore, changes in the direction of the political framework, which would increase uncertainty, must be avoided. Especially because many good paths have already been taken. In the area of onshore wind energy, for example, project approvals and awards have increased sharply.
From the perspective of the wind industry, it is particularly important that a competitive level playing field is ensured in Europe and that unfair market interventions are balanced out.
In addition, the legal framework for (cyber) security of the energy system, as a fundamental component of national security, must ensure that every wind turbine in the power grid is 100% reliable.”
Kerstin Andreae, chair of the water and energy industry federation BDEW:
“The energy industry is faced with the following fundamental priority: the ability to act must be guaranteed. The current situation must not lead to important measures not being implemented. It is therefore particularly important to bring those legislative initiatives to a close this year that are relevant to deadlines and cannot wait until next year.
Now it is a matter of taking action where there is consensus: in recent weeks and months, draft laws have undergone decisive improvements in numerous consultation processes. This often involves technical aspects and further developments. Here, too, responsible political action is characterised by the fact that well-founded legislative proposals do not fall victim to ideological or tactical calculations, but are advanced based on objective considerations. It is also not in the interests of the energy industry, security of supply and the energy transition if everything starts again from scratch after an election.
It is also important to me that politics also bears great responsibility within the European framework beyond Germany. Especially at the start of the new European Commission, Germany also needs a signal of stability and planning security with regard to the common European objectives and the implementation of existing initiatives. For example, a delegated legal act on low-carbon hydrogen must not be designed in a way that is far removed from practice just because Germany is unable to act."
Simone Peter, president of Renewable Energies Federation BEE:
"The end of the traffic light coalition amid the current national, European and international challenges is a political confession of failure.
In the energy sector, the coalition has set the right course and created the basis for independence, security of supply and price stability.
It is now important that the laws and budgetary resources already in process for the continuity of energy measures are passed by December. We cannot afford standstill and stalemate, even in a political crisis."