Germany's centre-left SPD and centre-right CDU parties announced a final coalition agreement today, which includes some changes to energy policy.
The parties still need to sign off on the agreement. The SPD will ask its members to vote on the text, which it expects could take about 10 days. And the CDU plans to hold a small party conference on the topic at the end of this month, meaning that the new government could be sworn in by early May.
The coalition still plans to abolish the gas storage levy "for all" as part of its plan to lower energy prices for households and industry. And the parties plan to introduce "suitable instruments" to ensure gas storage filling to safeguard security of supply in a "more cost-effective" way. There is a large focus on lowering energy prices for industry in the hope of turning the tide on Germany's continued industrial slump, for example through lower electricity taxes, a cap on power grid fees and special relief for energy-intensive industries "otherwise not reached by subsidy plans".
The government plans to "make possible and flank diversified, cheap long-term gas contracts with international suppliers" and "use potentials of conventional domestic gas production". And while the government is "examining strategic state holdings in the energy sector, also with grid operators", it will reduce its shares in Uniper and SEFE — which it had acquired in the gas crisis in 2022 — to "strategic shares". The state needs to sell down its stake in the two companies by 2028 but will probably retain a minority share, with the EU allowing a maximum 25pc plus one share, energy ministry officials previously said.
Support for gas-fired power
The parties reiterated their commitment to encourage the buildout of up to 20GW of dispatchable power generation capacity, with no apparent requirement for the plants to be hydrogen-ready.
The parties plan to put forward a bill to allow carbon capture and storage for hard-to-abate emissions from industry as well as gas-fired power plants "immediately after the beginning of the new parliament". The coalition said that the timing of the coal phase-out "has to be judged on how quickly it is achieved to build out dispatchable gas-fired capacities", but it still commits to ending coal burn by 2038.
The government reiterated its plan to use grid reserve capacity to stabilise power prices rather than only to stabilise the grid during supply shortages. Associations have warned about the implications of letting grid reserve plants participate in the open market on investment incentives for new generation capacity. It also remains unclear how long it would take to get Brussels' approval for a new subsidy scheme for dispatchable power generation capacity, given that the EU approved the outgoing government's power plant strategy only after lengthy negotiations.
Heating sector plan thin on detail
The future of Germany's heating law remains unclear in the coalition agreement.
The coalition agreement keeps the CDU's standpoint that the outgoing government's buildings energy act will be "abolished", which the SPD had not agreed with in the negotiation documents. But the parties said that a new buildings energy act will be more technology neutral and flexible, indicating that there will still be some legislation to reduce carbon intensity of the built environment.
The parties propose a "reachable greenhouse gas avoidance" as the key variable of a new policy, instead of the percentage of renewable energy used in the system as under the existing law. This could end up supporting gas-fired over oil-based heating or providing an incentive to replace older gas boilers with newer models.
But the government plans to retain subsidies for new heating systems and insulation measures, which provide large incentives for the uptake of heat pumps. Heat pump industry association BWP welcomed this commitment, combined with a pledge to reduce power prices by about €0.05/kWh, saying that these are "clear signals of an improvement in the framework conditions for the industry".
The final coalition agreement again contains a reference to a possible green gas quota, which could support gas-based heating systems, for example through biomethane or hydrogen which could be used to fulfil the quota. The parties said today that they would work out a "roadmap for de-fossilised energy sources" and that it is important to "preserve gas grids which are important for a secure heat supply".
