Economics Minister Reiche wants to cut energy subsidies

Katherina Reiche herself knows that she's made things exciting. She noticed "a certain unease," the Minister of Economic Affairs said on Monday morning, when the long-awaited monitoring report on the energy transition was finally available. The media had been "quite busy" all summer guessing what it would contain.

Not just the media. The entire energy industry has been stuck in four months of waiting and puzzling. That's how long the CDU politician took to take stock. Her predecessor, Robert Habeck (Greens), had already presented his opening assessment after just four weeks.

However, it had already been clear that the former manager of the grid operator Westenergie would advocate for a change of course. Habeck was concerned with climate protection, while Reiche focused on energy security and affordability.

The only open question was how much the Christian Democrat would change course. Would she demand more time, or even question the climate target as a whole? Quite a few in the energy and climate community had expected precisely that.

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But Reiche is sticking to the goal. 80 percent green electricity by 2030 and climate neutrality by 2045 – they are not going to change that, the minister emphasizes. However, she is revising the demand forecast downward. While the traffic light government had assumed electricity demand of around 750 billion kilowatt hours in 2030, Reiche now expects only 600 to 700 billion kilowatt hours – and intends to adjust the expansion plans accordingly.

The energy transition is "at a crossroads," she says. It will only remain a successful model if the reliability, security of supply, affordability, and cost-effectiveness of the energy system for the business location become the focus from now on.

In principle, this is also the core message of the assessment compiled by the Energy Economics Institute of the University of Cologne (EWI) and the consulting agency BET Consulting, which specializes in energy issues, based on existing studies and reports. "For the success of the energy transition, questions of financing, regulation, and risk minimization must be considered in addition to technical and economic feasibility," the report states.

Germany is "on track" with regard to its expansion targets, says BET Managing Director Alexander Kox. However, because costs have been lost, a refocus is necessary to achieve climate-neutral operations by 2045. "It will be incredibly complex, incredibly challenging, and it will cost a lot of money," says Kox. This money must be spent more intelligently than before.

On Monday, Minister Reiche presented a whole series of “key measures” to get the costs of the energy transition under control.

For example, she wants to adapt the construction of new offshore facilities and transmission grids to the reduced demand forecast. The fixed feed-in tariff for new plants is also to be abolished. Instead, Reiche wants to establish repayment mechanisms that are activated whenever green energy producers are making particularly high profits due to favorable market conditions.

The Christian Democrat wants to completely abolish subsidies for private solar systems on rooftops. Rooftop systems are profitable even without subsidies, she emphasizes.

Reiche also wants to more closely control the expansion of new wind and solar power plants. Instead of expanding as quickly as possible and increasing the largest possible generation capacity, he wants to focus on "grid-friendly expansion."

The announcements are being welcomed by the CDU and large segments of the business community. Monitoring is the foundation of a realistic and affordable energy policy, says CDU politician Tilman Kuban to the RedaktionsNetzwerk Deutschland (RND). Not only the grids, but also households, must not be overloaded.

Wolfgang Große Entrup, CEO of the German Chemical Industry Association (VCI), also believes the minister's conclusions are correct. "Affordability must finally play a central role again."

However, there is massive criticism from the climate and environmental activists. Christoph Bautz, managing director of the campaign organization Campact, accuses Reiche of an "attack on renewables." She reads the monitoring reports in a way that suits the fossil fuel lobby—her former employer.

Sabine Nallinger, chairwoman of the Climate Economy Foundation, calls the reduction in the electricity demand forecast alarming: "This trend means nothing other than a further deepening deindustrialization – especially in the future-oriented markets based on electricity," she says. Now it's time to invest more in efficient expansion, smart meters, and the electrification of buildings and transport.

Similar calls come from the think tank Agora Energiewende. "The response to weakening electricity demand should be to accelerate electrification and make the grids fit for the increasing consumption from transport, buildings, and industry – instead of slowing down the expansion of renewables," says Agora Germany head Julia Bläsius.