Politics

Political change

The End of the Energy Transition?

A return to coal? Source: dpa

Source: DPA

Andreas Pinkwart is on a mission. The Minister for Energy for North Rhine-Westphalia, Germany’s most populous state, wants to tear up many aspects of Germany’s much lauded transition from fossil fuels to renewable energies in a bid to halt electricity price hikes in his region.

In a speech last month, Mr. Pinkwart, a member of the economically liberal Free Democratic Party, or FDP, talked at length about the side effects of the country’s energy transition and his plans. He wants the market to do more of the work and for there to be fewer subsidies for wind and solar. He wants to preserve the use of fossil fuels and place greater restrictions on where wind turbines can be built. He thinks the energy transition, as envisioned by former chancellor Gerhard Schröder and current leader Angela Merkel, is a mistake.

Mr. Pinkwart is the most powerful FDP politician in the state’s coalition cabinet, led by Armin Laschet, a member of Ms. Merkel’s Christian Democratic Union, or CDU. Which means he is the master of power grids and renewable energies, with the power to reinvent energy policy in North Rhine-Westphalia. But more importantly, and much to the concern of climate protection experts, nuclear power proponents and energy companies, his controversial plans could soon serve as a blueprint for an energy about-turn across the country.

We do not want to end the energy transition, but make sure that it works according to market economy rules.

Andreas Pinkwart
Minister for Energy, North Rhine-Westphalia

Federal elections are due in Germany in September and a CDU-FDP coalition is currently attracting 48 percent support in polls. The FDP is supposedly the conservative CDU’s “partner of choice” for a coalition, and would be preferable to their current partners, the left-leaning Social Democrats, or SPD. So the CDU-FDP coalition in North Rhine-Westphalia could act as a political harbinger for things to come in Berlin.

Mr. Pinkwart is frank about his party’s political plans. “Our policy in North Rhine-Westphalia is also our policy at the federal level,” he said.

Political opponents are not the only ones who find these words worrying. “[A CDU-FDP coalition] would mean slamming on the brakes of the energy transition,” warned Claudia Kemfert from the German Institute for Economic Research. The state government would be able to overturn climate protection law, reduce the expansion of renewable energies and set minimum investment limits for wind farms, she worries.

Energy companies, traditionally conservative and economically liberal, are also concerned about a possible CDU-FDP coalition. Over the past few years, they have been implementing a variety of energy transition initiatives, to the detriment of their balance sheets and investors. And since Ms. Merkel’s decision to phase out nuclear energy after the Fukushima disaster, the companies have pinned their hopes on renewable energy. If a new coalition were to take power, would they need to reimagine their business models again?

Peter Terium would probably just shake his head at such an idea. The head of the RWE-subsidiary Innogy sees land-based wind power as an important growth area. Thanks to the close connection between Innogy and municipalities, which are shareholders in RWE, the company has easy access to land. Innogy also uses former brown coal mines to open up new sources of income. If Mr. Pinkwart successfully reduces government support for wind power, Innogy and the municipalities would be bereft. But ultimately, if a CDU-FDP government were to push brown coal for as long as possible, it would help RWE as it still focuses on traditional energy sources.

Is the FDP really ready to be known as the party that subsidizes old-fashioned industry? Its leader, Christian Lindner, as well as NRW premier Mr. Laschet, have called for a broad attack on the energy transition. The duo doesn’t only want to “preserve the energy mix,” but also the importance of fossil fuels. They also want to impose a new requirement that new wind turbines be built at a distance of at least 1,500 meters from residential areas. Around 80 percent of the area currently available for wind parks would be off the table if such a limit became official.

Such plans are likely to please those living near wind farms as well as workers in coal power plants. Environmental policymakers, climate protectionists and technology-conscious innovators, on the other hand, see German targets for climate protection and their chance for market leadership at risk. Mr. Pinkwart, however, doesn’t see what all the fuss is about. “We do not want to end the energy transition, but make sure that it works according to market economy rules,” he said.

Energy economist Andreas Löschel from the University of Münster understands Mr. Pinkwart’s perspective. “We should let the subsidies for renewables phase out slowly and move toward a market economy principle,” he said. He proposes a transitional period of several years.

If the price of traditional energy rises, the incentive to use renewable energies also rises. However, Mr. Löschel has doubts that “a CDU-FDP government would set the price high enough.” If they didn’t, then a “complete reorganization of climate policy” would be needed, he said.

 

This article was originally published in the business magazine WirtschaftsWoche. To contact the authors: online@wiwo.de