German coalition talks discuss increase in renewable ambition

This story was originally published for ICIS Power Perspective subscribers on 09 January 2018 13:06 CET.

German Social democrat (SPD) and Conservative (CDU/CSU) negotiators are currently meeting until Friday 12 January to explore political grounds for possible formal coalition talks. On 8 January, the results of the energy and climate task force leaked, revealing that the potential next grand coalition will abandon the 2020 emission reduction target but focus on a speedier renewable expansion towards 2020.

Background

• During the ongoing exploratory coalition talks in Germany amongst Conservatives and Social Democrats the domestic 2020 emission reduction target was dropped
• Germany aims to reduce emissions by 40% in 2020 compared to 1990, a target that many observers and policymakers deem impossible to reach without significant additional measures such as a shutdown of lignite plants
• The exploratory task force on energy and climate proposes to develop a package of measures to aim for an emission reduction of 40% during the early 2020s (with as much as possible done towards 2020) while the 2030 target of minus 55% would remain in place
• Package measures currently explored:
  • A special tender for solar PV and wind shall result in a reduction of between 8 and 10Mt CO2 towards the 2020 targets
  • Renewable power production would expand to reach a share of 65% by 2030
  • Set up of a commission to develop an action plan in 2018 on how to manage the transition in regions most affected by tighter climate protection regulations (e.g. coal phase out)
  • Potential adoption of a Climate Protection Act by 2019 with binding measures for the transport and construction sectors
  • Review and adjustment of the financing of the “Energiewende” with a focus on the reduction of the electricity tax and the stabilisation of the EEG-apportionment
• Reacting to the news, the German baseload Cal’20 contract posted its largest day-on-day drop on Monday, causing the contango of the curve to disappear

Analysis

• The discussed expansion of renewable energy towards 65% by 2030 goes beyond the pathway currently agreed on a political level
  • So far only targets for 2025 (40-45%) and 2035 (55-60%) were agreed by the previous grand coalition government
  • Meanwhile the Fraunhofer ISE, a German research institute, stated in its end-of-year assessment that in 2017, renewables represented a record of around 38.5 percent of public net power generation, up from 33.8 percent in 2016
• The special tender for solar PV and wind is on top of the scheduled RES auctions
  • The negotiators suggest to tender 4GW onshore wind and 4 GW PV solar as well as one offshore windpark, with half of the capacity available in 2019 and the other half online in 2020 if grid access allows.
• Following the Climate Action Plan 2050, the evaluation of options for mining regions in Germany realistically postpones an organised coal phase-out to the period until after 2020
  • This is opposite to the previous “Jamaica” talks which crashed on 20 November 2017 where negotiators had tentatively agreed to shut down 7GW of coal capacity, also to work towards the 2020 emission reduction targets

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