Government dispute threatens key energy reforms in Germany

Long-planned reforms to Germany’s energy policy are under threat due to a new dispute within the governing coalition. Tensions between the Social Democrats (SPD) and the Ministry for Economic Affairs, led by Katherina Reiche, could block the approval of major measures on grids, renewable energy support and electricity supply security.

The German government is seeking to make the country’s energy transition more cost-effective and thereby boost the competitiveness of industry. The Social Democrats, who helped shape current policy as part of the previous coalition government, have repeatedly accused Reiche of slowing the transition to a more environmentally friendly economy. The reforms were due to be discussed by the cabinet in the coming weeks.

Last week, Reiche submitted three draft reforms to other ministries for internal government consultation: an overhaul of the renewable energy support system, a package of measures to ensure electricity supply through new gas-fired power plants, and a transmission grid reform intended to align the expansion of wind and solar power plants with the slower development of the transmission grid.

SPD objects to limiting compensation for renewables

The Social Democrats had particular concerns about the transmission grid reform. Among other things, it is intended to better align the rapid growth of renewable energy with the slower expansion of transmission and distribution infrastructure. The SPD, however, has sharply criticised the proposal. According to its representatives, it could increase risks for investors in wind farms and slow the development of renewable energy.

The main point of contention is a proposed limit on compensation for electricity generators when their output has to be curtailed due to grid congestion. Under the proposed system, investors in areas with frequent grid problems would receive immediate grid connection only if they waived compensation for future supply curtailments for up to ten years.

The SPD says such a measure could seriously undermine investor confidence and hamper the development of renewable energy.

Heating reform also disputed

The SPD has also called for changes to the heating reform, which the government is due to approve in mid-May, according to Tagesspiegel Background. The party wants it amended to take greater account of social impacts. The SPD proposes that landlords bear some of the additional costs associated with higher energy prices if they opt for a new fossil-fuel boiler.