The sun may shine on Germany’s Jamaica
While the rise of the populist right, and its entering of the German Parliament for the first time since the Second World War may be capturing international headlines, the shape the next German government will take remains unclear. But its colors are beginning to show.
The party positions and the result of the September 24 election points to the formation of the likely Jamaica Coalition between the center right CDU/CSU block, led by Chancellor Angela Merkel, the free-market FDP and the German Greens. The moniker Jamaica has been bestowed on the coalition on the basis of the black, yellow and green flag of the country – which corresponds to the potential coalition parties’ political colors.
The SPD will likely move into opposition. This has been widely seen as an attempt to differentiate itself and stop the drift of its base to rivals that have a policy agenda distinct to that of the government, led my Merkel. The birth of the Jamaica Coalition is unlikely to be an easy one. But just what is the potential outcomes for clean tech and renewable energy in particular under the new government?
The policy levers by which the transition to a low carbon economy can be achieved will undoubtedly be one of the most controversial issues for discussion amongst the coalition partners, alongside immigration and refugee policy.
The position of the FDP and the Greens are very different when it comes to renewable energy. It will partly depend on each parties’ skill in negotiating a coalition agreement and policy platform that will determine the result.
The Greens advocate the transition to a 100% renewable electricity system by 2030, alongside the transformation of Germany’s entire energy system to a zero-emission platform by 2050. To achieve this aim, the Greens want to do away with the caps on renewable energy deployment, put in place ostensibly to prevent the costs of support programs from blowing out – as they did earlier this decade. In parallel, the Greens are calling for phase-out of coal-fired generation and the use of fossil fuels for transport and the heating sectors, these latter two sectors having for some time long lagged behind Germany’s medium and long-term climate targets.
On the other hand, the FDP is advocating that a market-based system for renewable development be encouraged, including the abandonment of the feed-in priority of renewables on Germany’s grid – which essentially forces grid operators to take renewable energy when and where it is available. With regards to the deployed technology mix across the different energy sectors, the FDP has shown a preference for a technology-neutral and cost-efficient approach without privileging nor restricting any specific generation or fuel source.
In terms of these larger electricity market issues, compromise is likely. It is possible the FDP would support the establishment of a “decentralized capacity market” whereby utilities procure capacity on a technology-neutral basis, whether conventional generation, renewables, storage systems, or other mechanisms such as demand response. The proposed market structure is supposed to contribute to a secure electricity system where fossil-fuel must-run capacity is gradually replaced by dispatchable renewable capacity. Equally a “fixed market premium” mechanism may be supported, in which dispatchable supply assets are incentivized – thereby delivering system flexibility.
A significant upside for the renewable sector may be delivered through the potential support from both the FDP and the Greens for distributed generation, and potentially, renewable generation coupled with storage. The Greens have advocated for as much as 140 GW of solar PV to be added in Germany, a huge increase on the 40 GW currently installed. The positions of both the Greens and the FDP may coalesce around the abolition of the so-called “sun tax”, whereby taxes are collected on electricity generated by households and businesses on their own rooftops and consumed on site.
Indeed, electricity taxation in general, which can be considered as impediment to the rise of distributed generation deployment and the energy ‘pro-sumer’ more generally, may be reduced or even abolished.
The future of Germany’s renewable legislation, the EEG that at one point was a world leader in terms of renewables policy, is set to be the subject of hot debate amongst the Jamaica coalition partners. The current exemption for large industrial consumers, which are spared from funding the EEG and with it Germany’s energy transition, is unlikely to be changed, with both the FDP and its larger potential coalition partner CDU likely to bow to pro-business forces.
Article published in The Beam.
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