Wind looks on as Germany awaits key coalition vote

On Sunday, Germany’s political impasse could come to an end.

Chancellor Angela Merkel has struggled to form a government since her weak showing in September’s election but, on Sunday, the Social Democrats are due to vote on whether to enter formal coalition talks with Merkel’s Christian Democrats. It’s a key time.

It’s also not a foregone conclusion. Social Democrats leader Martin Schulz said this week that he didn’t know if he had enough support for a ‘grand coalition’ like the one between the parties from 2013 to 2017. Schulz has warned that some within the party fear that another tie-up with Merkel could do them irreparable damage.

If the party rejects talks, there are two likely outcomes: another election, or a minority government. And it'd cast a huge shadow over Merkel’s political future. We may have a very different European political landscape by this time on Monday morning.

For those in the wind sector, a return to the coalition could be attractive. Between the end of 2012 and the end of 2016, total
wind capacity in Germany grew from under 31GW to over 55GW, representing average installations of 4.9GW a year.

The initial coalition talks also give further optimism for wind, as they suggest that the parties will step up their goals for both renewables and cutting emissions.

They have suggested they could raise the target for renewables in the electricity mix in 2030 from 50% to 65% – although this could just be a recognition that Germany is on track to hit this anyway. It has already exceeded its 2020 renewables target.

The coalition has also indicated that it would award support for an extra 4GW of onshore wind in 2019 and 2020 on top of its existing goals, and an unspecified extra amount of offshore wind capacity. That would bolster turbine orders and give more certainty for the manufacturers that are making long-term investment decisions.

That would certainly be welcomed by manufacturers that have been hit by the launch of competitive tenders for onshore wind last year. While tenders are a necessary step for the market, the government’s target of tendering 2.8GW wind capacity each year has reduced the level of turbine orders; and preferential rules for community-led groups further compounded the uncertainty as it is unclear when winning developers will need to order turbines. Enercon’s Hans-Dieter Kettwig gave his views in November.

The government is levelling the playing field for 2018, which is welcome. But shows how the coalition hasn’t always got things right when it comes to renewables.

For example, the growth of wind can't gloss over the fact that around 30% of German electricity is powered by coal; and that the nation's carbon emissions have crept up in recent years. The country’s lignite plants still rank among some of Europe’s biggest polluters. And yes, this may be a natural result of Germany’s plan to phase out nuclear, but it highlights that the coalition has not always been the green leader it wants people to think it is.

And it is also worth noting that energy policy is only one of many priorities for Germany. The coalition has plenty of other priorities, including migration, taxes, defence, healthcare and so on.

On balance, we think it'd be beneficial for the wind sector if the coalition can carry on with the renewables policies it has started. But, if these coalition talks fall apart, it is absolutely not the end for renewables in Germany. Savvy businesses and public support for renewables will seek to keep the issue on the agenda.

We will have more clarity on all of this after Sunday.