May 5, 2025
Germany's incoming energy minister will take over a packed agenda that includes gas plant tenders.
Germany's new government will begin on May 6, six months after the previous coalition ended, with new energy minister Katherina Reiche expected to address urgent legislation, according to energy experts. Reiche, a former CDU lawmaker and current head of Westenergie, will focus on reducing energy costs while the climate agenda will move to the environment ministry.
Her predecessor, Robert Habeck from the Greens, faced challenges in executing critical energy projects due to diminished Russian gas supplies and rising energy costs, which hindered economic growth. However, these issues also sped up the development of renewables, grid infrastructure, hydrogen regulations, and new LNG import terminals.
Reiche's initial actions will be more technical and regulatory rather than focused on large expenditures. The government plans to implement promised energy cost reductions, including cutting electricity taxes and fees related to power and gas storage. These initiatives will have immediate effects and lay the groundwork for longer-term policies aimed at decarbonization.
Some measures, such as eliminating the gas storage levy, could be enacted by July 1, with coalition negotiators considering around €55 billion ($62 billion) in support during this parliamentary term. Additionally, a review of future electricity demand will occur before the summer recess, helping to revise targets for solar and wind expansion.
Analysts from Aurora Energy Research emphasized the need to reassess Germany's energy transition goals to align with economic realities, as current renewable expansion targets are based on a 2030 power demand estimate of 750 TWh, while they project a range of 600-650 TWh. S&P Global expects demand to be between 572-624 TWh for 2030.
Encouraging demand is critical, as negative prices suggest both an increase in renewable capacity and a decline in power demand, which could hinder renewable energy goals. The system must encourage shifts in demand to take advantage of low-cost periods, especially for the 215 GW solar target set for 2030.
Germany's solar capacity has doubled since 2020, surpassing 100 GW, with most installations on rooftops, while large-scale projects are also increasing without subsidies. The coalition aims for new wind and solar projects to be financially self-sustainable.
The next reform of the Renewable Energy Sources Act (EEG) will increasingly use market-based mechanisms and comply with EU regulations, such as contracts for difference, replacing the current sliding premium contracts for wind and solar projects.
Adjusting GW targets to meet the goal of an 80% renewable share by 2030 could lead to significant changes. Solar growth has already slowed, while record permits for onshore wind could prompt sector recovery before reforms are implemented. An urgent reform to the Energy Industry Act (EnWG) was passed in January.
In her first 100 days, Reiche may also want to enact the long-awaited CCS law to include projects in climate Contracts for Difference (CfDs) and plan a capacity mechanism for Berlin to incentivize up to 20 GW of new gas-fired power plants, although the actual capacity might be closer to 10 GW.
Despite urgent industry demands, the draft legislation for Habeck's power plant strategy lacked cross-party support, but Reiche is unlikely to start from scratch due to EU approval being a significant obstacle delaying tenders. A new provision in the coalition treaty allows reserve coal plants to increase supply during "Dunkelflaute" episodes, which caused price spikes last winter.
Muir from Commodity Insights warned the new government to consider the implications of possibly supporting reserve capacity, as price peaks serve as market signals for flexibility. Since the election, gas and power prices have significantly dropped, aiding Germany's economic recovery. The month-ahead gas price at the THE hub was €32.89/MWh on April 30, down from a peak of €60/MWh before the election. Power prices for 2026 fell below €80/MWh after exceeding €100/MWh in February but remain above pre-crisis levels, largely due to higher gas and carbon prices.
Commodity Insights analysts predict that the average power price for Germany in 2026 will be €68.50/MWh amid increasing volatility. Focus will now shift to the new government's 100-day program, and how swiftly the budget is drafted will be crucial for implementing economic policies over the summer.
Her predecessor, Robert Habeck from the Greens, faced challenges in executing critical energy projects due to diminished Russian gas supplies and rising energy costs, which hindered economic growth. However, these issues also sped up the development of renewables, grid infrastructure, hydrogen regulations, and new LNG import terminals.
Reiche's initial actions will be more technical and regulatory rather than focused on large expenditures. The government plans to implement promised energy cost reductions, including cutting electricity taxes and fees related to power and gas storage. These initiatives will have immediate effects and lay the groundwork for longer-term policies aimed at decarbonization.
Some measures, such as eliminating the gas storage levy, could be enacted by July 1, with coalition negotiators considering around €55 billion ($62 billion) in support during this parliamentary term. Additionally, a review of future electricity demand will occur before the summer recess, helping to revise targets for solar and wind expansion.
Analysts from Aurora Energy Research emphasized the need to reassess Germany's energy transition goals to align with economic realities, as current renewable expansion targets are based on a 2030 power demand estimate of 750 TWh, while they project a range of 600-650 TWh. S&P Global expects demand to be between 572-624 TWh for 2030.
Encouraging demand is critical, as negative prices suggest both an increase in renewable capacity and a decline in power demand, which could hinder renewable energy goals. The system must encourage shifts in demand to take advantage of low-cost periods, especially for the 215 GW solar target set for 2030.
Germany's solar capacity has doubled since 2020, surpassing 100 GW, with most installations on rooftops, while large-scale projects are also increasing without subsidies. The coalition aims for new wind and solar projects to be financially self-sustainable.
The next reform of the Renewable Energy Sources Act (EEG) will increasingly use market-based mechanisms and comply with EU regulations, such as contracts for difference, replacing the current sliding premium contracts for wind and solar projects.
Adjusting GW targets to meet the goal of an 80% renewable share by 2030 could lead to significant changes. Solar growth has already slowed, while record permits for onshore wind could prompt sector recovery before reforms are implemented. An urgent reform to the Energy Industry Act (EnWG) was passed in January.
In her first 100 days, Reiche may also want to enact the long-awaited CCS law to include projects in climate Contracts for Difference (CfDs) and plan a capacity mechanism for Berlin to incentivize up to 20 GW of new gas-fired power plants, although the actual capacity might be closer to 10 GW.
Despite urgent industry demands, the draft legislation for Habeck's power plant strategy lacked cross-party support, but Reiche is unlikely to start from scratch due to EU approval being a significant obstacle delaying tenders. A new provision in the coalition treaty allows reserve coal plants to increase supply during "Dunkelflaute" episodes, which caused price spikes last winter.
Muir from Commodity Insights warned the new government to consider the implications of possibly supporting reserve capacity, as price peaks serve as market signals for flexibility. Since the election, gas and power prices have significantly dropped, aiding Germany's economic recovery. The month-ahead gas price at the THE hub was €32.89/MWh on April 30, down from a peak of €60/MWh before the election. Power prices for 2026 fell below €80/MWh after exceeding €100/MWh in February but remain above pre-crisis levels, largely due to higher gas and carbon prices.
Commodity Insights analysts predict that the average power price for Germany in 2026 will be €68.50/MWh amid increasing volatility. Focus will now shift to the new government's 100-day program, and how swiftly the budget is drafted will be crucial for implementing economic policies over the summer.