Market News

 September 23, 2009
Energy policy in the next German government

 BERLIN/FRANKFURT - German Chancellor Angela Merkel is seeking re-election in a federal vote on Sunday and polls give her conservatives a solid lead over their coalition partners and rivals, the Social Democrats (SPD).

Merkel hopes to form a coalition with the business-friendly Free Democrats (FDP), and voter surveys give her just enough support for such a centre-right alliance.

However, other ruling partnerships are possible, including a second "grand coalition", grouping Merkel's Christian Democrats (CDU) and the Bavarian Christian Social Union (CSU) and the SPD.

Below are the most various coalition scenarios and how they would likely affect German energy policy:


NUCLEAR ENERGY - All three parties see nuclear energy as a crucial part of the energy mix until renewables are able to generate sufficient amounts to replace them. The three parties would look to extend the lives of the 17 nuclear plants, doing away with the plans to phase them out by 2020. German companies could be required to give the state a share of profits generated by the extension. Sal Oppenheim analyst Matthias Heck estimated if German utilities RWE and E.ON operated their plants 15 years longer and turned over up 50 percent of the profits the earnings gains could total as much as 9 euros per share for RWE and 4.2 euros for E.ON.

RENEWABLES - The commitment to renewables might not be quite strong as under a government that included the SPD or Greens, but all three parties are committed to the long-term goal of raising the share of renewables in the energy mix. There has been speculation of an accelerated reduction in rates utilities are required to pay photovoltaic energy producers but eastern CDU state premiers reliant on the fast-growing industry would likely oppose that once again.

CLIMATE CHANGE - A centre-right government would likely take a more pro-business approach, refusing to set speed limits on national motorways or taking steps that would hurt the German car industry. The parties support a successor to the Kyoto Protocol and EU goals to reduce CO2 emissions.


NUCLEAR ENERGY - The SPD is unlikely to budge on its nuclear phase-out plan as it has been a centre-piece of party policy. Merkel's CDU/CSU would push for a softening of the phase-out law in coalition talks. A failure to extend the lifespan of nuclear plants would have a limited negative impact, if any, on the share prices of leading German energy firms like RWE and E.ON. There would also be clashes over the need to identify a final repository site for nuclear waste. Conservatives want it to be Gorleben while the SPD wants a diverse, longer, discourse.

RENEWABLES - The conservatives and SPD revised a law last year on renewable energies such as wind, solar power and biomass, securing support levels for at least six years. Germany now gets 15 percent of its electricity from renewable sources and its goal is 27 percent by 2020 and 45 percent by 2030. The SPD would likely push hard for new energies as part of its programmes to create alternatives to fossil fuels.

CLIMATE CHANGE - A grand coalition would continue pursuing Germany's goal of reducing CO2 by 40 percent by 2020 from 1990 levels. There would be conflicting views on coal generation. The conservatives are pro-coal and support CCS (carbon sequestration and storage) process technology. Despite reservations about coal, the SPD could ill-afford to risk losing thousands of coal-to-power station jobs in coal mining areas as they are key voter bases. The SPD supports stricter speed limits on motorways but the CDU/CSU oppose this.


The three other coalitions that are considered possible after the German election are a CDU/CSU partnership with the Greens, an SPD coalition with the FDP and Greens and, least likely, a CDU/CSU government with the FDP and Greens.

All these constellations would have trouble bridging the differences on nuclear energy and variations that include both the FDP and Greens would be at loggerheads on climate change and renewables policies that risked hurting business. (Reporting by Erik Kirschbaum, Peter Dinkloh and Vera Eckert; Editing by Charles Dick)

By Reuters