The energy sector in Germany is going through a period of political uncertainty exacerbated by the recent dissolution of the government coalition, following the dismissal of Finance Minister Christian Lindner. This situation comes as the country faces major economic challenges, including rising energy prices and weak growth. The BDEW (German Energy Industry Association) recently released a statement calling for an acceleration of energy reforms before the dissolution of the Bundestag, Germany’s parliament, scheduled for January.
Energy reforms on hold
The BDEW, through its Managing Director Kerstin Andreae, emphasizes the need to finalize certain draft laws before the end of 2024. Among these projects is the amendment to the EnWG Act, essential for future appeals of offers relating to gas power plants. This measure aims to strengthen energy security and support the transition to cleaner energy. Andreae highlights that delaying these initiatives could threaten progress made in the energy transition and increase uncertainties in the sector.
Political instability in Germany comes as the country faces an energy crisis exacerbated by the lingering effects of the war in Ukraine. Indeed, the rise in gas prices, partly due to the cessation of Russian gas imports by pipeline, continues to weigh on the German economy, complicating the management of the energy transition.
The energy agenda of the CDU/CSU opposition
The German opposition, represented by the CDU/CSU alliance, recently presented its own energy program, entitled “New Energy Agenda”, which emphasizes reducing costs to achieve carbon neutrality by 2045. The CDU/CSU , which currently leads in the polls, defends a less restrictive vision in terms of emissions and envisages tax cuts to stimulate investment. This program contrasts sharply with the ecological objectives of the Greens and the SPD (Social Democratic Party), former coalition partners.
Simone Peter, president of the Renewable Energy Association (BEE), expressed concern about the impact of this political instability on green energy development goals. She described the end of this coalition as a “political confession of failure”, citing the potential consequences for current energy projects, particularly in terms of hydrogen and the reduction of carbon emissions.
Repercussions at European level
The uncertainty in Germany also has a European dimension, with the future European Commission due to take office in December after the European Parliament elections in June. According to BDEW, Germany, as a major energy market, plays a central role in discussions on low-carbon hydrogen and other European Union energy projects. This perspective is shared by the German Industry Association (BDI), which calls for the formation of a stable government in Germany to support European cooperation and guarantee the continent’s energy security.
Critics of the current instability fear that energy policy will be further slowed down, particularly in issues such as the introduction of a delegated act on low-carbon hydrogen, the implementation of which requires an active contribution from the ‘Germany. This delay could weaken European ambitions for the transition to a carbon-neutral economy.
Prospects for the coalition and Germany’s political future
Chancellor Olaf Scholz acknowledged the political and economic challenges facing Germany, saying compromise between parties would be necessary in the future to ensure a solid parliamentary majority. With federal elections scheduled for March, current polls put the CDU/CSU in the lead, while the Greens and SPD, with lower scores, may not gain enough support for a lasting coalition.
The political outlook in Germany, characterized by disagreements over debt and emissions reduction targets, portends months of uncertainty for the energy sector, which depends on a stable legislative framework to move forward on its energy transition projects. The complexity of the situation is increased by European energy issues and the potential impact of German instability on the energy market in Europe.
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