German ruling coalition party FDP rejects EU proposal for contracts for difference to support renewables

German government coalition member and pro-business party FDP (Free Democratic Party) has criticised a proposal agreed by EU member state governments last week to make so-called two-way contracts for difference mandatory for future state renewable energy support, reported news magazine Der Spiegel. “We have decided several times in the government coalition that there will be no promotion via contracts for difference in Germany,” MP and co-head of the FDP parliamentary group Lukas Köhler told the magazine. Thus, should the support via other means such as through the current Renewable Energy Act (EEG) be banned at EU level, the expansion of wind and solar energy in Germany would have to take place “purely on the basis of the market economy,” he added. Significantly reduced costs for renewables facilities meant that renewables should “prevail on the market even without further subsidies,” said Köhler. In two-way contracts for difference, the state agrees to top up the market price when it is below an agreed level. It then asks the energy producer to pay back an amount when the market price is higher than a certain limit, in order to prevent excessive windfall profits. The FDP has long been sceptical of state subsidies for renewables, and has specifically rejected contracts for difference.

EU member state governments agreed to propose to make two-way contracts for difference the mandatory model used for public funding of new power-generating facilities based on wind energy, solar energy, geothermal energy, hydropower without reservoir and nuclear energy. This rule would apply after a transition period of three years, following the regulation's entry into force – which could still take many months. The proposal is part of the EU member states' agreement on reforming the bloc's electricity market, which was hailed as a success from French and German ministers, whose dispute over the role of nuclear power in European climate action dominated negotiations for months. While France achieved a general inclusion of nuclear power in future state-supported models, Germany insists that the deal should not lead to unfair competition through publicly funding ageing reactors abroad. After receiving the green light from member states, negotiations with the European Parliament can begin. Concessions for nuclear and coal power, or the proposal on mandatory contracts for difference could ultimately be cut again.