Germany's new coalition of SPD, Greens and liberal FDP agreed Nov. 24 a coalition treaty that brings forward the country's coal phase-out date from 2038 to 2030.
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The parties also plan to lift Germany's renewables target for 2030 from 65% to 80% of electricity demand with a massive expansion of wind and solar.
The 2030 solar target would be doubled to 200 GW, the offshore wind target lifted by 50% to 30 GW and the electrolyzer capacity target for hydrogen production doubled to 10 GW.
Plans are based on power demand rising to a range of 680-750 TWh/year in 2030.
Party leaders presented the agreement after weeks of talks in Berlin following the Sept. 26 election.
The treaty now needs to be approved by SPD and FDP party conferences, while the Greens require approval by all members.
The coalition parties plan to vote for Olaf Scholz as new Chancellor in the first week of December.
Green Party co-leader Robert Habeck is set to become the new economy, energy and climate minister with the Greens also set to take the foreign and environment ministries.
In a press conference, Habeck confirmed the 2030 coal exit date and announced plans to set a Eur60/mt floor price for CO2 without providing details.
EUA carbon allowance prices hit a record Eur72.91/mt Nov. 24, almost tripling year-on-year amid tighter EU climate targets.
The talks have been dogged by spiraling energy prices with the future role of gas one of the more controversial issues between the parties and key decisions from EU taxonomy guidelines to the new Nord Stream 2 pipeline looming.
Germany's nuclear exit in 2022 and ongoing coal phase-out plans are set to increase Europe's biggest economies reliance on gas.
Earlier reports indicated that the treaty would include a 2040 target date to phase out gas which slipped to 2045 as set out by the climate law.
"Displacing dispatchable gas for power completely will be challenging," S&P Global Platts Analytics' head of long-term European gas analysis Adrian Dorsch said.
"We are already assuming sharp declines in gas for heating demand by 2040 but completely banning the replacement of boilers in 2040 will likely not be possible," he added.
Platts Analytics forecasts German gas-fired generation in 2025 to exceed that from coal for the first time on record and already projects little space for coal beyond 2030.
Long-term, gas and power prices are forecast to fall with the 2022-2026 average less than half current levels, according to Platts Analytics' Five-Year Forecasts.
"Higher overall power price levels would help lower subsidies for wind and solar assets and this in turn would lower consumer bills," said Sabrina Kernbichler, European power analyst at Platts Analytics.
The unit projects a record 46 GW of new wind and solar capacity to come online in the four years to 2025, but even faster growth would be required for the new 2030 targets.
For new gas-fired power plants, hydrogen readiness will be a key prerequisite to either secure CHP subsidies or ensure a viable long-term business model and we do expect new gas-fired capacity to switch to hydrogen from the mid-2030s, Kernbichler said.
Platts assessed hydrogen (SMR with CCS, including capex and carbon) at Eur5.97/kg based on front-month gas prices, half the cost of so-called green hydrogen (PEM electrolysis including capex) based on front-month electricity prices currently trading around Eur200/MWh across Europe.