Legislative Traffic Jam after the German Traffic Light Coalition Goes Dark

What impact will the government's exit have on the German energy transition?

What is it all about?

The initial furore over the break-up of the German governing red-yellow-green traffic light coalition following the dismissal of the finance minister and the resignations of other ministers on 6 and 7 November 2024 has now subsided. The timetable for a new parliamentary election is in place.

The political debate now mainly focuses on analysing the reasons for the break-up of the coalition and the responsibility for this, and on the consequences of the government crisis on the current legislative process.

In the area of energy law in particular, many legislative proposals are in limbo. The likelihood of important energy projects being implemented depends not only on the current status of the legislative process, but in particular on whether a legislative majority can be found in parliament.

The following shall provide an overview of some of the most important pending energy law projects.

Current legislative initiatives

Core energy law amendments

On 13 November 2024, the Federal Cabinet approved a comprehensive and extensive (452 pages) draft bill to amend the core of the German energy laws (including the Energy Industry Act (Energiewirtschaftsgesetz), the Renewable Energy Sources Act (Erneuerbare-Energien-Gesetz), the Metering Point Operation Act (Messstellenbetriebsgesetz) and numerous other laws). Among other things, the draft includes regulations on offering fixed-price electricity supply contracts, energy sharing, grid connection (see also our article (in German)), smart meter expansion and the promotion of solar power expansion. Getting (parts of) the draft over the line before the end of the current parliament would allow to adapt the current legislation to the requirements of an enhanced smart meter rollout and standardising grid connection reservations for renewable assets.

In view of the scope alone, it seems questionable whether all of the regulations will be implemented. However, the Ministry of Economic Affairs, which is in charge, sees at least a chance of partial implementation. 

Implementation of RED III and the Emissions Trading Directive

The most recent Renewable Energy Directive with regulations on acceleration zones and the expansion of energy storage facilities must be transposed into national law by 21 May 2025. While several implementation laws have been introduced into the parliamentary process, their adoption is uncertain.

The implementation of the latest Emissions Trading Directive into German law was adopted by the German government in October. The draft law is intended to lay down the requirements for the start of emissions trading in the buildings and transport sectors. Implementation is particularly urgent in view of the emissions permits required in 2025 and the reporting obligation that will take effect then.

Both initiatives are crucial to ensure timely adoption of the requirements under European law which would give actors in the energy sector more time to prepare and make use of the newly introduced features as acceleration areas for renewable expansion.

Power Plant Security Act

To implement an urgently needed power plant strategy to increase the resilience of the German electricity system, the now minority government is planning a Power Plant Security Act. A draft bill is being discussed. The regulations on new tenders for hydrogen-capable gas-fired power plants and long-term storage for electricity are intended to compensate for the volatility of electricity generation associated with a higher proportion of renewable energies in the electricity mix. The feature is key for the wider plans of renewable expansion in Germany as the plants are required to guarantee a basis capacity also in times of Dunkelflaute.

As this act needs money and current statements from the CDU/CSU parliamentary group, a successful conclusion to the legislative process seems unlikely.

Carbon dioxide and hydrogen

The draft amendment to the Carbon Dioxide Storage Act (see also our article (in German)) was recently discussed in a public committee hearing. The CDU/CSU parties agree in principle with the planned authorisation of CO2 storage, meaning that implementation may happen.

However, the outlook is less clear for the Hydrogen Acceleration Act, which has also already been heard by the Committee on Climate Protection and Energy. The Act is intended to simplify and digitalise the planning and approval procedures for electrolysers in particular.

Outlook

Whether and, if so, which of the initiatives will be adopted before the end of the 20th German Bundestag will depend on the political will of the formerly  governing coalition parties, and particularly the opposition CDU/CSU parties.

Even considering the substantive positions of the parties to date, forecasting if and where the legislative traffic jam will clear remains uncertain. Tactical considerations are likely during the election campaign. Only time will tell whether the traffic lights for energy legislation remain red or turn to yellow or even green. 

It would certainly have been helpful for a reliable energy transition if, instead of the abrupt end of the traffic light coalition, there had been an orderly dissolution once the urgent legislative projects had been completed. Instead, there is now a long period with two phases of uncertainty: the phase of traffic light legislation that has just begun and, after the election, the phase until a new government is ready to take office.