FEATURE: Germany's next energy minister to inherit full inbox including gas plant tenders

Germany's new government is to start on May 6, six months after the break-up of the previous coalition, with new energy minister Katherina Reiche expected to quickly pick up urgently needed legislation, energy experts told Platts.

The incoming energy minister, a former CDU lawmaker and current head of grid operator Westenergie, will inherit a pressing agenda with lowering energy costs top of the list, while the climate resort will be transferred to the environment ministry.

Reiche's predecessor Robert Habeck (Greens) struggled to implement key energy projects the previous coalition set out in 2021 amid the loss of Russian gas supplies and rising energy costs, which have stunted economic growth.

However, these challenges also accelerated the expansion of renewables, grid infrastructure, hydrogen regulation, and the establishment of new LNG import terminals.

"Some of Reiche's first steps will be quite technical and regulatory, rather than the big spending gun. Firstly, the government will put into place energy cost reductions they've promised, including the electricity tax cut and the cuts in [power] grid and gas storage fees," said Henning Gloystein, practice head energy and climate at consultancy Eurasia.

"These cuts will have immediate effects and lay the foundations for longer-term policy implementations and spending plans to help decarbonize," Gloystein said in emailed comments.

Some measures like waiving the gas storage levy could get implemented by July 1 with coalition negotiators planning some Eur55 billion ($62 billion) of support over this parliament.

Also before the summer break, a review of future electricity demand will set the framework for a revision of solar and wind expansion targets.

Analysts at Aurora Energy Research said reassessing Germany's energy transition milestones was a "necessary step in ensuring that policy remains grounded in economic and technical realities" with current renewable expansion targets based on a 750 TWh power demand assumption for 2030.

Aurora pegs 2030 demand in a range of 600-650 TWh.

S&P Global Commodity Insights analysts forecast 2030 demand in a range of 572-624 TWh.

"Invigorating demand is paramount -- while negative prices in part point to the large buildout of renewable capacity, they also point to the structural loss of power demand. This proves detrimental to EEG ambitions," said Daniel Muir, senior German power analyst at Commodity Insights. "The system needs to be incentivised to shift demand and take advantage of low-cost periods, particularly in summer," Muir noted with focus on the 215 GW solar target for 2030.

German solar capacity doubled since 2020 to over 100 GW with most panels still on rooftops, while utility-scale projects are growing fast and without subsidies.

For renewables, the coalition's declared aim is for new wind and solar plants to "fully refinance themselves in the market."

The next EEG reform will "increasingly incorporate market-based instruments" and implement EU requirements such as contracts for difference to replace the current sliding premium contracts that underpin onshore wind and solar projects under the EEG 2023.

Adjusting GW targets to the overall goal of 80% share of renewables by 2030 could result in significant shifts (see table).

Record growth for solar over recent years has already slowed, while record permits and tender awards for onshore wind are set to result in a sector recovery before any reforms can take hold.

For solar, an urgent reform to the EnWG was passed in January.

German 2030 power scenario projections

Source: S&P Global Commodity Insights (*adjusted to 80% share goal; **various sources)

First 100 days

Elsewhere, Reiche may also quickly want to enact the long overdue CCS law, so that projects can be included in the climate CfDs, Eurasia's Gloystein said.

Reiche must also swiftly get to planning the capacity mechanism for Berlin to go ahead with plans to incentivize up to 20 GW of new gas-fired power stations, Gloystein said noting that actual volumes could be closer to 10 GW.

Despite urgent calls from the sector, draft legislation implementing Habeck's power plant strategy did not get cross-party support, but Reiche is unlikely to start from scratch, especially as EU approval was a key hurdle delaying those tenders.

A new feature agreed in the coalition treaty is to allow reserve coal plants to boost supply during so-called "Dunkelflaute" episodes that caused price spikes last winter.

"The new government should caution the implications of potentially supporting reserve capacity. The price peaks are a feature, not a bug, and they provide market-based signals to the value of flexibility," Commodity Insights' Muir said.

Power plant operators are split on the benefits of such regulatory changes.

Gas and power prices have eased sharply since the election, helping the new government to revive Germany's economy.

German month-ahead gas at the THE hub was assessed at Eur32.89/MWh on April 30 after hitting Eur60/MWh, the highest in two years, just before the Feb. 23 vote.

Power for 2026 delivery dipped below Eur80/MWh after exceeding Eur100/MWh in February, still well above pre-crisis levels, with higher gas and carbon prices the main driver.

Commodity Insights analysts forecast German 2026 power to average Eur68.50/MWh amid rising spot and seasonal volatility.

"Markets will now be focused on the new government's 100-day programme," Marion Muehlberger, political analyst at Deutsche Bank Research said in a note.

"How quickly the new government draws up the budget will be decisive for whether economic policy impulses can take effect over the summer."

German Energy Policy State of Play

Source: Compiled by S&P Global Commodity Insights