Dispatch from Germany | November '24

Stories to watch in the weeks ahead

• Political upheaval – The FDP's exit from the governing coalition over disagreements on how to get out of the economic slump and the right way forward in the energy transition has put a sudden stop to many policymaking plans. A 2025 budget hasn’t been agreed, putting many financial commitments at risk. Many plans, strategies and draft laws are now in limbo – including tenders for hydrogen-ready gas plants, an electricity market overhaul, industry decarbonisation contracts, car industry support, and strategies for carbon management and adaptation.
• Cooperation still possible? – Numerous stakeholders, including businesses, NGOs and the country’s federal states, have called on the parties in parliament, especially the opposition conservatives, to vote in favour of passing uncontroversial legislation with the minority government. This should avoid long delays that will harm economic recovery and stall the energy transition progress. The coming weeks will bring clarity about whether some measures will pass before Scholz will initiate a vote of confidence that is required to dissolve parliament, scheduled for 16 December. Some degree of cooperation still appears possible – for example, the opposition Christian Democratic Union (CDU) and Christian Social Union (CSU) alliance supported the continuation of the country’s popular national flat-rate public transport ticket.
• Conservatives in the lead – According to recent polls, CDU leader Friedrich Merz has the best chance to succeed the unpopular chancellor Olaf Scholz, who will lead his party in the snap election despite calls to make way for the more popular defence minister Boris Pistorius as the Social Democrats’ (SPD) candidate. Merz’s conservative CDU/CSU alliance has a comfortable lead (33%), followed by the far-right AfD (19%), which all major parties have vowed to exclude from a future government.  Scholz’s SPD currently languishes on 15 percent, slightly ahead of the Green Party (12%), which will be led into the election by current economy minister Robert Habeck. Both the nationalist-left Sahra Wagenknecht Alliance (BSW) and Scholz’s former coalition partner, the pro-business Free Democrats (FDP), poll around the five percent threshold required to enter parliament.
• Energy and climate electioneering – Energy and climate issues were a central reason for the coalition’s collapse, and they are set to feature in the upcoming election campaign, which otherwise is set to be dominated by discussions about immigration and Germany’s economic malaise. The conservatives have often sharply criticised the government’s energy and climate policies in recent years, suggesting that certain priorities are set to change under a new government. But don’t expect a massive turnaround, as many aspects of the energy transition enjoy cross-party support. There was brief speculation about whether Germany might return to nuclear energy under a conservative government, but Merz poured cold water onto these plans, while former plant operator E.ON said restarting old reactors is not a viable option. Highly anticipated election programmes that must now be drafted seven months earlier than initially planned will reveal more details about the parties’ energy and climate plans. For now, many party ideas remain nebulous and the programmes will only become available from mid-December onwards. Clean Energy Wire will scan them for energy and climate policy proposals as soon as they are published – so stay tuned.
• Economic worries – Germany’s political upheaval is playing out against the backdrop of growing concern about the economy as a whole, fuelled by an ongoing decline of manufacturing activity, a weakening labour market, and mounting worries about the future of the country’s carmakers in particular (see below). Especially with a view to the upcoming elections, Germany’s economic troubles will remain a central focus during the months to come – as will be the economic policies of the U.S. administration under president Trump, who has vowed to slap tariffs on key trade partners, including Germany and the rest of the EU. In contrast to other major economies, Germany's is expected to stagnate this year after a slight contraction in 2023.

The latest from Germany – last month in recap

• That sinking feeling – The coalition government’s collapse dominated the news in recent weeks, drowning out most other energy and climate-related developments. A notable exception was the ongoing trouble at struggling carmaker VW, Germany’s largest private employer, which has become an emblem for the country’s industrial woes. Chancellor Scholz called on the management to tread carefully regarding plans cited by the company’s works council to shutter three domestic factories and reduce the workforce in its home country by tens of thousands of employees. The economic troubles also weigh on many company plans for decarbonisation investments, for example in the steel industry (see below), while a report by consultancy KPMG found that more than half of companies in Germany’s most important stock indices are already lagging behind on their self-imposed targets for emissions reduction.
• Hydrogen core grid – Germany plans to see the first hydrogen flow in pipelines from next year after the country’s "core hydrogen grid" was approved. The energy industry widely welcomed the move, while southern German states complained that the design left them at a disadvantage. Uncertainties about future hydrogen needs and sources remain. Researchers said Europe could do without electricity and hydrogen imports if renewable expansion proceeds as plans, contrary to government plans to import gas from further afield. Gas grid operator Open Grid Europe (OGE) warned that new doubts over Thyssenkrupp Steel Europe’s decarbonisation plans using hydrogen put the country’s plans for the hydrogen core grid at risk.
• Dunkelflaute – Several days of little sunshine and wind, a prolonged ‘Dunkelflaute’ (dark lull), pushed down renewable electricity production in Germany and other central European countries in early November, causing a spike in fossil fuel use and wholesale power prices. However, energy analysts said such conditions are common at this time of the year and do not pose a risk of blackouts to the country’s power system. Germany is still debating how to fund H2-ready gas power plants which, alongside European power imports, should help secure electricity supply during these dark doldrum periods – the corresponding Power Plant Security Act is among the priorities for the energy industry among laws that the minority government should make sure to still get passed. New data showed that Germany’s electricity system remained one of the most reliable in the world despite the nuclear exit and the energy crisis. However, the Dunkelflaute still fuelled debates about necessary back-up capacity and power market reforms.
• Gas shortages not in sight – Germany and Europe appear well prepared to enter the third winter without Russian gas. Storage facilities are well stocked, LNG imports have become a mainstay, and the risk of shortages is low, according to authorities. The gas industry has reassured citizens that they won’t have to freeze, even in the case of an extremely hard winter – but stressed that savings should still be made wherever possible.

Sören's picks – Highlights from upcoming events and top reads

• Germany is rapidly moving towards an electricity system based almost entirely on renewables, with far-reaching implications. My colleague Caro is currently taking a closer look, and will publish a whole package on the topic over the coming weeks, including a fact-sheet and interviews, so watch this space. In her first instalment, she is investigating if and how policymakers still need to support renewables – it’s a great overview, explaining why we need to slowly move away from feed-in tariffs, which kicked off the whole energy transition, towards other models.

• It only came up briefly in this dispatch, but obviously the U.S. election results overshadow everything that’s happening in German politics, and also our work at Clean Energy Wire. For me, the most thought-provoking and worrying analysis came from British Observer journalist Carole Cadwalladr. I discussed her opinion pieces widely at home and at work, and I’m still unsure to what extent she is right. I also re-watched her TED talk on the role of social media during the Brexit campaign – it’s well worth it.