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Germany’s Energiewende blowin’ in the wind

The direction of the country's energy transition policy remains unclear following the general election

Germany's federal elections on 24 September saw no changes at the top as Angela Merkel retained the Chancellorship. But the nature of the country's future energy policy will be shaped by the horse trading currently taking place to decide which parties will be in the ruling coalition.

To govern, Merkel's centre-right Christian Democratic Union needs to form a coalition with one or two of a handful of smaller parties. That involves trying to get politicians with diverse views on boardprobably the leaders of the Greens and the Free Democratic Party. Those talks have barely started, with the CDU still struggling to agree the common policy platform with its sister party in Bavaria, the Christian Social Union. That needs to happen before it can move on to tackling other even more complex partnerships. The CDU/CSU alliance took 33% of the vote, making it the largest group in parliament.

Cem Ozdemir, co-leader of the Greens, said after the election that the party would focus on climate change in any coalition talks. The Greens will be pushing to accept the Paris climate change agreement in its entirety, remove fossil fuels from the German energy mix as fast as possible and speed up the transition of its car fleet to electric vehicles. The Greens want a stop to both coal power and gasoline vehicles by 2030, and introduce a carbon price floor.

The Free Democratic Party, meanwhile, although supporting the Paris pact, has a more flexible view on how it will be implemented. The FDP regards fossil fuel energy sources as indispensable for the foreseeable future. The party supports the continued use of diesel, despite recent scandalsnotably one involving Germany's Volkswagen regarding under-reporting of harmful emissions from diesel vehicles. It doesn't support a carbon price floor.

Merkel has cultivated an image as a champion of climate change measures, though Germany's performance in hitting its climate change targets has not been stellar.

The government's long-term aim is to cut emissions by 80-95% below 1990 levels by 2050 and it has also set an ambitious interim target of a 40% reduction by 2020. However, several forecasters expect that it will miss thatattaining a reduction of only around 30%. Germany may also fail to meet its EU target of obtaining 18% of its energy from renewable sources by 2020.

Political power

But the shifting sands of German politics may yet help speed up the greening of German power. The centre-left Social Democratic Party, the country's second-largest force, was a key player in the previous coalition. This time, it has already ruled itself out of any coalition, after faring poorly in the electionits share of the vote fell by 5.2% from its 2013 result, down to 20.2%.

The SPD was a strong voice in government in support of the thousands of workers whose jobs are reliant on German power plants fed by coal, including heavily polluting lignite. Without that SPD support, a new government could find it easier at the party-political level to close those plants faster.

However, a rapid rundown of coal-fired power would still leave the problem of how to deal with a wave of unemploymentseveral tens of thousands of jobs would be at risk in the lignite industry and in its supplier companies. Many of those are in the working class heartlands of the far-right Alternative for Germany party, which performed better than expected in the elections. Merkel has ruled out doing any deals with AfD, but can't afford to ignore those who voted for them, or who might do so in the future.

It would also be a monumental task. In early September, Germany's deputy economy minister Rainer Baake said Germany would need to close down 25 gigawatts of coal-fired power capacity by 2030, or around half of its current capacity, if it is to meet targets under the Paris agreement. That would trigger massive social change and put strain on renewable energy.

What is highly unlikely to happen is a revival of Germany's nuclear power, which the government decided to wind down following the 2010 Fukushima plant disaster in Japan. In 2011, over 80% of parliamentarians voted in favour of closing all nuclear plants by 2022 and the only objectorsthe Greenswanted to do it faster. However, it's easy to envisage some degree of latitude in this, depending on technical issues and the speed with which other low carbon energy sources can be brought online.

Given the planned nuclear shutdown and the need to close coal capacity, natural gaswhich produces around half the carbon emissions of some forms of coalis set to remain a pivotal feedstock in the German energy mix for the foreseeable future, regardless of which parties form the coalition.

That ought to be good news for Russian president Vladimir Putin, whose government and state gas company Gazprom have invested considerable resources into wooing Germany to commit to taking Russian gas supply through ventures such as the Nord Stream and Nord Stream 2 pipeline projects. However, the removal of the SPD from the ruling coalition will be a blow to Russian influence in German politics. The party was a strong backer of Russian gas imports when in governmentindeed, former SPD leader and German Chancellor Gerhard Schroeder is a friend of Putin, who heads the Nord Stream shareholders committee and was recently nominated to be an independent director of Rosneft.

With the SPD gone, it may prove to be the role of the Greensand the concessions they can ring from Merkel for their support, if she needs itthat will hold the key to how German energy policy is forged.

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