What do the German coalition talks mean for wind?

The news that negotiations have begun ahead of the potential formation of a new German coalition could signal a favourable turn for the wind market.

Angela Merkel by FNDE via Wikimedia Commons

It has been a promising fortnight for European wind power. After the vote by the European Parliament to raise the EU’s target for renewables in the electricity mix to 35% by 2030, hopes have also been raised this week for the expansion of wind power in Germany.

On Sunday, the Social Democrats narrowly voted to enter into formal coalition talks with Angela Merkel’s Christian Democrats. Uncertainty remains as to whether party members will approve of the final deal, but the decision to enter into talks appears encouraging.

Last Friday, the government published a 28-page document giving an outline of potential policy, including insights into energy policy. A draft version of the document, leaked earlier in the week, had caused controversy due to its acknowledgement that the new government is planning to drop its 2020 carbon emissions target because it could no longer be achieved. It is now aiming to hit this target in the early 2020s instead. This is because the government has scaled up coal and cut nuclear in the wake of the 2011 Fukushima disaster.

As we explored in Friday’s Wind Watch, however, Germany could also reasonably claim that its renewable energy policy has been a success. The country has already exceeded its 2020 renewables target, and it has been suggested that the 2030 target could be raised from 50% renewables in the electricity mix to 65%.

This news came in the same week as the decision by the European Parliament to raise the EU’s 2030 renewables target to 35%, in order to maintain progress towards meeting the commitments of the Paris climate agreement. Wind professionals operating in the EU will be pleased to see that the trend for increasing renewables targets is not limited to Germany.

Due to the short length of Germany’s document and its provisional nature, the wind sector gets limited certainty from it. Coalition negotiations still need to happen. However, it does give reason for optimism. An additional 4GW of onshore wind and 4GW of solar are to be auctioned, as well as an unspecified amount of offshore wind, before 2020.

The ambitious nature of the renewables targets is likely to be welcomed by turbine manufacturers, as it gives greater confidence in long-term investment decisions. As we explained in Friday’s Wind Watch, 2017 was a discouraging year for German turbine manufacturers. Yes, they benefited from the tail end of a construction boom as a result of developers rushing to win approval for schemes before the new tenders took place, but they were also hit hard by the launch of competitive tenders for onshore wind.

During the last round of auctions, government regulation tended to favour community-led groups, leading to frustration for manufacturers due to the delay this caused in completing projects. The updated rules for the upcoming round of auctions mean that companies can compete on equal terms with community groups, creating great potential for new business.

Angela Merkel will no doubt be breathing a sigh of relief at the decision to begin formal talks: and, we think, so will the wind industry.