Released February 03, 2025 | SUGAR LAND
en
Written by Paul Wiseman for Industrial Info Resources (Sugar Land, Texas)--In the world's ongoing "Another One Bites the Dust" political saga, German Chancellor Olaf Scholz acted to dissolve his embattled coalition in December of last year, leading to new elections that are scheduled for February 23. While a number of issues led to the dissolution, a looming energy crisis and its ripples across the economy tops the list.
On December 16, Scholz called for a confidence vote, knowing his coalition would lose. That would speed a resolution to the infighting, moving the election to February 23 instead of waiting until the regularly scheduled September date. The coalition, consisting of Scholz's Social Democratic Party (SPD), Alliance 90/The Greens, and, until November 7, the Free Democratic Party (FDP), collapsed when Scholz dismissed FDP Finance Minister Christian Lindner. Lindner had resisted calls by Scholz to allow an increase in government borrowing to cover Germany's support of Ukraine as it resists the ongoing Russian invasion.
Currently the SPD is third in voter polls, with rival Christian Democratic Union (CDU) under Friedrich Merz expected to return to power. Website Politico.eu shows CDU and its sister party the Christian Social Union (CSU) leading with about 30% approval, with newcomer far-right Alternative for Germany (AfD) second with 21%. These are the only two German parties gaining in popularity. Scholz's SPD trails at 16%, with Greens at 13%.
While a coalition between CDU/CSU and Afd would give a majority, no party wants to ally with AfD due to its radical beliefs. The most likely alliance, then, would be among CDU/CSU and Scholz's SPD, although he would not likely retain his leadership after last fall's debacle.
Issues of Energy and the Economy
What will the new government mean for Germany's energy policy? First, here are some of the issues that helped bring down the previous government.
Rising energy costs due to, some feel, premature retiring of nuclear plants (the last retired in 2023) and coal, have harmed profit margins for German manufacturing, a key part of the economy. The remaining natural gas-fired plants are fighting higher prices with the loss of Russian pipeline gas due to the latter's invasion of Ukraine. Imports account for well over 90% of Germany's gas supply. While liquefied natural gas (LNG) imports are rising, the infrastructure needed for distribution to end users is lagging behind.
Natural gas accounted for 25.9% of the country's total energy supply in 2023, and 17% of the electricity, according to figures from the International Energy Agency (IEA), down 12% from the previous year, but 70% higher than in 2020. That change is largely due to the retirement of nuclear and coal plants which supplied most grid power in the early 2000s.
For "Energiewende," the name for the nation's attempt at relying on wind power, "dunkelflaute" is part of the problem. Translated to "dark doldrums," it describes a calm day where wind turbines are idle. In November and December of 2024, dunkelflaute ruled the day, slashing wind power's output by 25% over normal levels. In 2023, wind farms supplied 27% of the grid's power.
With prices rising, Germany's former dominance in manufacturing has lost much of its investment value, and it has in turn lost market share to China. The economy has shrunk for two consecutive years, something that has not happened in decades.
What's the Plan?
CDU/CSU and SPD have almost opposite goals for energy. SPD, since its coalition came to power in 2021, has closed the remaining nuclear plants, and worked toward boosting Energiewende investment. Here, alternatively, is the CDU's platform:
A marriage of convenience (or necessity) between these two would likely result in gridlock, some say, although CDU does favor increasing wind power in its plan to lower energy costs by boosting supply. But, in practical terms, if the dark doldrums continue, a higher wind turbine count will provide only symbolic relief for energy prices.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).
On December 16, Scholz called for a confidence vote, knowing his coalition would lose. That would speed a resolution to the infighting, moving the election to February 23 instead of waiting until the regularly scheduled September date. The coalition, consisting of Scholz's Social Democratic Party (SPD), Alliance 90/The Greens, and, until November 7, the Free Democratic Party (FDP), collapsed when Scholz dismissed FDP Finance Minister Christian Lindner. Lindner had resisted calls by Scholz to allow an increase in government borrowing to cover Germany's support of Ukraine as it resists the ongoing Russian invasion.
Currently the SPD is third in voter polls, with rival Christian Democratic Union (CDU) under Friedrich Merz expected to return to power. Website Politico.eu shows CDU and its sister party the Christian Social Union (CSU) leading with about 30% approval, with newcomer far-right Alternative for Germany (AfD) second with 21%. These are the only two German parties gaining in popularity. Scholz's SPD trails at 16%, with Greens at 13%.
While a coalition between CDU/CSU and Afd would give a majority, no party wants to ally with AfD due to its radical beliefs. The most likely alliance, then, would be among CDU/CSU and Scholz's SPD, although he would not likely retain his leadership after last fall's debacle.
Issues of Energy and the Economy
What will the new government mean for Germany's energy policy? First, here are some of the issues that helped bring down the previous government.
Rising energy costs due to, some feel, premature retiring of nuclear plants (the last retired in 2023) and coal, have harmed profit margins for German manufacturing, a key part of the economy. The remaining natural gas-fired plants are fighting higher prices with the loss of Russian pipeline gas due to the latter's invasion of Ukraine. Imports account for well over 90% of Germany's gas supply. While liquefied natural gas (LNG) imports are rising, the infrastructure needed for distribution to end users is lagging behind.
Natural gas accounted for 25.9% of the country's total energy supply in 2023, and 17% of the electricity, according to figures from the International Energy Agency (IEA), down 12% from the previous year, but 70% higher than in 2020. That change is largely due to the retirement of nuclear and coal plants which supplied most grid power in the early 2000s.
For "Energiewende," the name for the nation's attempt at relying on wind power, "dunkelflaute" is part of the problem. Translated to "dark doldrums," it describes a calm day where wind turbines are idle. In November and December of 2024, dunkelflaute ruled the day, slashing wind power's output by 25% over normal levels. In 2023, wind farms supplied 27% of the grid's power.
With prices rising, Germany's former dominance in manufacturing has lost much of its investment value, and it has in turn lost market share to China. The economy has shrunk for two consecutive years, something that has not happened in decades.
What's the Plan?
CDU/CSU and SPD have almost opposite goals for energy. SPD, since its coalition came to power in 2021, has closed the remaining nuclear plants, and worked toward boosting Energiewende investment. Here, alternatively, is the CDU's platform:
- Lower the electricity tax and grid fees to reduce costs.
- Develop grids, storage facilities and all renewables, and focus on affordability and security of supply.
- Keep nuclear energy on the table, prioritizing research into fourth- and fifth-generation nuclear technology, small modular reactors and fusion power plants and reviewing the resumption of operations at the most recently shut-down nuclear power plants.
A marriage of convenience (or necessity) between these two would likely result in gridlock, some say, although CDU does favor increasing wind power in its plan to lower energy costs by boosting supply. But, in practical terms, if the dark doldrums continue, a higher wind turbine count will provide only symbolic relief for energy prices.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).
