Energiewende Ministries in New German Cabinet

After the members of the Social Democratic Party (SPD) voted in favour of a grand coalition with the conservative Christian Democrats (CDU) and the Bavarian Christian Social Union (CSU), SPD party chairman Sigmar Gabriel will become Minister of Economics and Energy, with an enlarged ministry now also covering renewable energy. SPD treasurer Barbara Hendricks will become the new Environment Minister in the next cabinet of Angela Merkel (CDU), albeit without responsibility for renewable energy. As a result, the Energiewende shall be managed mainly by the Social Democrats.

In view of the many open issues in connection with energy policy shift away from nuclear power towards a mainly renewable energy supply  like spiraling costs related to the support for renewable energy, delays in grid expansion and the economic strain on conventional plants that provide back-up power for the variable renewable input, this will not be an easy task.

The strong position of SPD ministers may facilitate the upcoming Energiewende discussions. In the past Liberal Economics Minister Philipp Rösler and Conservative Environment Minister were occasionally of different opinion, e.g. regarding the backloading of EU emission allowances. Besides, many bills will not only need approval by Parliament, where CDU/CSU and SPD now have a large majority, but also by the Federal Council, which represents the interest of the sixteen German states (Länder). Many Länder are ruled by coalition governments in which the SPD is a member.

While Sigmar Gabriel already served as Environment Minister in the first grand coalition headed by Chancellor Merkel (2005 to 2009), Mrs Hendricks has not yet held prominent positions in the Environment or Economics Ministry. She was, however, a state secretary in the Finance Ministry from 1998 to 2007.

A bill amending the Renewable Energy Source Act (EEG) that provides financial support for renewable energy by granting fixed feed-in tariffs, will be the most pressing task for Mr Gabriel, as EEG-related costs are being felt more and more painfully by the German industry as well as private consumers. In their coalition agreement CDU/CSU and SPD announced to present an EEG reform by Easter 2014. It will be interesting to see what Mr Gabriel and Mrs Hendricks will make out of it.

In September 2013 Mr Gabriel was critical of the Energiewende in an interview with the magazine Wirtschaftswoche. If the Energiewende was not completely redesigned and professionally managed it would be the greatest deindustrialisation programme in the German history, he said. While the EEG was a very good law as long as renewable energy only played a marginal role, the “invest and forget” philosophy of the EEG, was no longer suitable for a system in which renewables provided the main share of energy. Hence renewables had to become responsible for grid stability and had to be subjected to market forces. Expansion had to be limited and coordinated with the construction of conventional (back-up) power plants and grid expansion. Mr Gabriel also pointed out that currently modern gas power plants are being shut down in Germany (as they are no longer profitable given the fact that renewables receive EEG support and enjoy feed-in priority). He also spoke out in favour of coal-fired power plants, saying one could not phase out nuclear power and coal at the same time.

More headwind for the EEG seems to come from the EU. According to a report by Frankfurter Allgemeine Zeitung (FAZ) EU Competition Commissionar Joaquin Almunia is set to challenge Germany on the EEG, opening official state aid proceedings into the partial reductions of the EEG surcharge for which large energy consumers can apply pursuant to Sections 40 to 44 EEG on Wednesday. Besides, the Commission was to consider whether the EEG as a whole has to be regarded as state aid, FAZ writes.

In November, the European Commission already released its Communication “Delivering the internal electricity market and making the most of public intervention”. According to the communication, financial support shall help make renewables competitive, but shall gradually be reduced to zero with falling production costs. Feed in tariffs shall be replaced by feed-in premiums or other support instruments which give incentives to producers to respond to market developments.

Source: SPD; CDU

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