New government plans to speed up renewable expansion

After 16 years, Germany has a new chancellor, and the Greens are part of the federal government again after an equally long hiatus. In the conclusion of our series on the energy system of tomorrow, we explain the goals that the incoming government has in store for energy policy and how it aims to achieve them.

Once nuclear and coal-fired power plants will shut down for good in Germany in 2022 and 2038 resp. (if not earlier), renewable energy is supposed to supply almost all of our electricity. The three parties that make up the new government—the Social Democrats (SPD), the Greens, and the Liberals (FDP)—have now agreed on even more ambitious goals in their coalition agreement.

In our blog series “The future of energy”, we took a close look at various forms of renewable energy and their respective challenges. In order to revive the stagnant expansion of onshore wind power, for example, rules on minimum distances from residential areas will need to be relaxed and quantitative targets for land use will need to be introduced, as well as shorter approval procedures. Better financial remuneration of municipalities will help improve the acceptance of wind parks among local citizens. Offshore wind turbines need new tender rules, more areas reserved for them, and a quicker construction of links with the mainland. Setting up solar plants is exceedingly complicated, not least for private households. The myriad requirements should be reconsidered, especially for comparatively small systems generating 30 kW and more. The same is true for connecting solar plants to the power grid. Moreover, the existing options for consumption by owners, tenants and neighbourhoods are too limited. The surcharge on electricity prices for subsiding renewables (“EEG-Umlage”) is a significant burden for consumers and producers.

In order to compensate for the increasing fluctuations in electricity production, more gas-fired power plants will have to be built so as to secure the base load in periods of little sunshine and wind, in addition to the expansion of grids and storage facilities.

Hydrogen, especially green hydrogen from renewables, should help decarbonise energy-intensive industries. Above all, the chicken-and-egg problem—the simultaneous build-up of demand, supply and infrastructure—and the issue of the different “colours” of hydrogen, based on its CO2 footprint, must be resolved.

The new coalition seeks to tackle these issues, as set out in the coalition agreement from late November 2021. The phase-out of coal should "ideally" be finished as early as 2030. Germany is to obtain 80% of its electricity from renewables by 2030; the goal so far was 65%. At the same time, due to the spread of electric vehicles and the increasing coupling of the energy, heat, traffic and industrial sectors, the new government projects the nationwide demand for electricity to amount to 680-750 TWh in 2030, while the previous government expected around 650 TWh after several revisions upward. The expansion of renewables is therefore to be massively accelerated, for example by setting a target of two percent in terms of land used for onshore wind power. Consultations between the federal, state and local governments are to make available areas as early as 2022. Yet disputes about the widely differing rules at the state level on minimum distances from residential buildings, among other things, are likely. Offshore wind power is to be given priority over competing forms of use (e.g. fishing, shipping, conservation) and by 2030 30 GW are to be installed, a rise of 50 percent compared to the previous government’s goal. The new government has doubled the 2030 target for solar energy too, from 100 to 200 GW. It plans to adjust the remuneration rates for feeding in solar power and to introduce a legal obligation to install solar panels on new commercial buildings. The existing cap on subsidies and the obligatory public tender for larger plants will be put under review.

On the fiercely debated issue of wind turbines harming protected species, the coalition agreement indicates a paradigm shift away from the protection of smaller populations, or even individual animals, towards protecting populations at large. Assessment methods that apply uniformly across the nation are to provide clarity in balancing the sometimes clashing goals of protecting the climate and wildlife. The new government expressly seeks to "remove all hurdles and obstacles" for the expansion of renewables (see page 56 of the coalition agreement).

Digital and simplified procedures as well as more (including external) personnel are to cut the time necessary for planning new plants and getting them approved by “at least 50 percent”. Involving citizens at an earlier point in the planning process and allocating political responsibilities clearly are two further pertinent steps the new government wants to take. In the case of priority projects— drawing on the model of the Federal Immission Control Act—the government is to mandate shorter deadlines for the final approval decision.

Germany is to produce significantly more green hydrogen in 2030, with a targeted capacity of 10 GW for electrolysers. The coalition intends to "ambitiously" revise the National Hydrogen Strategy from 2020 as early as 2022. For the transition period on the road to carbon neutrality, the regulations are to be neutral with respect to different technologies, thus allowing for the production and use of non-green hydrogen. In addition to promoting major cross-border projects for the establishment of hydrogen infrastructure, the coalition aims to propel the plans for an EU-wide certification system of green hydrogen. The new government regards natural gas as a “bridging technology” that helps safeguard the electricity supply. To this end, new gas-fired power plants are to be built and linked with combined heat and power (CHP). The entire gas infrastructure is supposed to be able to switch to hydrogen in the long run ("H2-ready").

The new government further intends to make comprehensive changes to the regulations for the electricity market in order to improve the incentives for decentralised power production and sectoral coupling. Another purported measure is to introduce, for the first time, a uniform definition for large-scale energy-storage facilities in the existing legal framework. As was widely expected, the EEG-Umlage will be paid from the federal budget from 2023 on so as to lower prices for consumers and firms. The existing basket of policy instruments is to be expanded by including, for example, “Carbon Contracts for Difference" for energy-intensive companies and “Power Purchase Agreements” (between businesses and producers of renewable energy).

The new governments’ ambitions for climate and energy policy are manifest in the distribution of the ministerial posts and the responsibilities of the government departments. Under the aegis of the Vice-Chancellor Robert Habeck (hitherto co-head of the Green party), the economy and climate portfolios will be united in a single ministry for the first time. The environmental ministry too, previously responsible for climate protection, will be headed by a politician from the Green party, Steffi Lemke. This new setup is intended to facilitate coordination between the two departments, whose relationship has been conflict-ridden.

Yet the Social Democrats, with Olaf Scholz at the helm of the government, and the Liberals, with Christian Lindner as finance minister, will also have a major influence on the new government's climate and energy policies. Given the divergent priorities of the coalition partners—for example on state investments, industrial subsidies, and conservation—it cannot be excluded that the current optimistic mood will give way to infighting and tough bargaining sooner rather than later.