Germany votes for energy transition, and to buy back the grid

Two weeks after Australia voted in a conservative government that appears intent on slowing down the transition to a low-carbon economy – if not bring it to a full stop – the people of Germany appear to have done the opposite.

As the dust settles on the election results, and Chancellor Angela Merkel begins the process of selecting a new coalition partner, most observers are suggesting that the poll results are positive for Germany’s Energiewende, the ambitious energy transition program that aims to have Europe’s strongest industrial economy powered 50 per cent by renewables by 2030, and 80 per cent by 2050.

The biggest reason for this optimism is the disintegration of the right-wing FDP party, which polled so badly it will no longer have a seat in the lower house.

As a junior member of the ruling coalition with Merkel over the past four years, the FDP had wielded considerable ability to block progress on energy and climate policy and had, on ideological grounds – sought to block progress on carbon markets, and energy efficiency and renewable energy laws.

The poor performance of the FDP in state elections, where it lost power in Bavaria and Hessen, means that the balance in the crucial second chamber of the German parliament is now further tilting towards states in favour of the Energiewende.

However, one intriguing result of the election included a referendum in the state of Hamburg to buy back the lower power grid from Vattenfall, and turn it into a local municipal-based public utility.

The proposal gained a majority, despite active campaigning and a lavish budget against it by most major parties, including the centre left SDP, which rules in the state, Merkel’s centre right CDU and the FDP.

As one observer noted: “Regardless of whether this will mean much in terms of promoting renewables (almost everyone agrees it doesn’t), it is a clear signal that citizens are favouring a publicly owned, decentralised energy system with a leading role of renewables.”

That could be critical because one of the biggest issues confronting a “grand alliance” between Merkel’s CDU and the SPD is reform of the Erneuerbare-Energien-Gesetz (EEG), the renewable energy act which for the past 13 years has underpinned the transition, which has so far reached a level of 23 per cent renewables.

The EEG surcharge in 2013 rose 47 per cent to 0.528c/kWh, about one fifth of electricity costs. That burden currently falls mostly on households, and Bloomberg New Energy Finance says a new Coalition would likely seek to remove some exemptions from businesses.

Hamburg is not the only city in Germany to want to buy back its grid. Berlin holds a similar vote next month, and nearly a dozen other municipalities have either voted for or are in the process of doing the same.

The states will be increasingly important in energy policy as many of the progressive states with a strong interest in local energy transition have greater power in second chamber of parliament, which is decisive for energy legislation.

Some analysts expect a new ministry of energy/energiewende to be created. This may help address some of the current tensions between the environment and economy ministries, but its direction will depend on who will lead it.

The Greens also polled poorly. Some are suggesting it was due to a poor strategic decision to downplay their core themes such as environment, energy, climate, and focus on tax hikes which they want to introduce to pay for better education.

Analysts at HSBC last week suggested that the election in Germany would be critical in unblocking domestic and European policies on renewables, carbon and efficiency.

It said September – with elections in Germany, Australia and the release of te IPCC report on Friday – would be critical for the progress of climate action.

The German result is likely to present good news. HSBC believes the IPCC report – despite its criticism in some quarters, and particularly by the fossil fuel lobby – could mark “a new phase in climate action”. HSBC says that would leave a Tony Abbott-led Australia distinguishing itself “as an exception to a broader trend to increased commitment, notably in the G-2 (China and the USA).”