Germany's new coalition partners agree energy policy framework for coalition talks

Leaders of Germany's CDU/CSU and SPD parties on March 8 agreed to start coalition talks on the basis of a policy framework paper that includes some details for energy under the possible new coalition in Berlin.

The paper lists plans to reduce power tariffs by at least Eur50/MWh, measures to boost supply such as reserve power plants and support for 20 GW of new gas-fired power plants as well as plans for a green gas quota and a law on carbon capture and storage (CCS).

"The results of the exploratory talks between CDU, CSU, and SPD provide the right impulses for a resilient, climate-neutral, and affordable energy supply," the head of Germany's gas and hydrogen association Timm Kehler said in a statement.

"Particularly positive is the clear commitment to the construction of 20 GW by 2030," the association said. Equally encouraging is the planned green gas quota, which aims to introduce climate-neutral gases into the market, it added.

The announcement of a legislative package for CCS also demonstrates that the future federal government has "pragmatic solutions in mind for a climate-friendly industry," it added.

However, the paper lacks support for long-term LNG supply contracts, the gas association said.

CDU leader Friedrich Merz said March 8 that he aims to have a new government in place by the end of April.

The CDU/CSU won the Feb. 23 vote, but needs a partner for a majority. CDU/CSU and SPD together have 328 of the 630 seats in the new Bundestag.

German power for year-ahead delivery closed March 6 on EEX exchange at Eur79.93/MWh, its lowest so far this year and more than 20% below mid-February levels above Eur100/MWh.

Competitive industrial power prices

A key focus in energy is competitive industrial power prices, listed as the first priority of the second chapter to revive Germany's economy.

"For quick relief, we want to reduce the electricity tax for everyone to the European minimum level... and halve the transmission network fees. The goal is a permanent cap on network fees," the document said.

In addition, the parties aim to expand electricity price compensation to other energy-intensive sectors.

Under supply, the paper calls for more supply to "stabilize and reduce electricity costs."

Reserve power plants should be used not only to prevent supply bottlenecks but also to stabilize electricity prices, it said hinting at potential changes to regulation covering some 10 GW of mainly old coal-fired power plants that have exited the market but are not allowed to close permanently.

On support for new gas power plant capacity, the parties aim for a "rapidly revised power plant strategy."

On renewables, "in addition to the determined and grid-friendly expansion of solar and wind energy" the parties also plan to expand bioenergy, hydropower, geothermal energy, and storage capacities.

The paper did not mention a return of nuclear power, but the partners intend to further research on fusion technology, aiming to build the world's first fusion reactor in Germany under the "Fusion 2040" program.

Elsewhere, the potential coalition partners plan to "immediately pass a legislative package at the beginning of the legislative period that enables [CCS], particularly for hard-to-avoid emissions in the industrial sector."

For the proposed hydrogen core grid, the parties plan to expand the network to industrial centers in the south and east of Germany.

The parties remain committed to German and European climate goals.

"We are determined to adhere to these climate goals. We want to pragmatically and unbureaucratically bring together climate protection, social balance, and economic growth," the strategy paper, which also sets out a planned massive increase in financing including a new Eur500 billion ($540 billion) infrastructure fund, said.

To approve Germany's new financial framework, Merz intends a vote by the old Bundestag (lower house of parliament) that would require the support of the Green party and the upper house (Bundesrat).