Beyond speed dating

Germany’s coalition partners have moved beyond speed dating and are now starting to thrash out the details of an agreement to form a new government.

Listen to a discussion on Germany’s path to decarbonisation and why the country needs to roll out more renewables at a faster rate – especially given the current global energy crisis and soaring fossil fuel prices.

Guest: 

• Claudia Kemfert, Head of Department Energy, Transportation and Environment,  German Institute for Economic Research

Transcript

0:01

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Richard Sverrisson, Editor-in-Chief, Montel: 0:11

Hello listeners and welcome to the Montel Weekly podcast, bring You Energy Matters in an informal setting. Listeners, bear with me, but this week's pod returns to Germany and its road to decarbonization. Why so much prominence to Germany? You may rightly ask. The country is the continent's largest energy market. It imports over 90% of its natural gas. And more than a third of its power generation comes from fossil fuels. If Germany fails in moving to a low carbon future, then so does the rest of Europe. Helping me, Richard Sverrisson to discuss these issues and what the next government could look like is Claudia Kemfert of the German Institute for Economic Research. A warm welcome to you, Claudia, and it's great to have you back on the pod.

Claudia Kemfert, Head of Department Energy, Transportation and Environment, German Institute for Economic Research: 0:54

Hello and thanks for having me,

Richard Sverrisson, Editor-in-Chief, Montel: 0:56

Claudia. First of all, could you give us an update on the current state of negotiations with the parties? We've discussed this a little bit on the pod previously, but what's the. The current state of affairs?

Claudia Kemfert, Head of Department Energy, Transportation and Environment, German Institute for Economic Research: 1:06

Yeah. It's a good question. Right now, the negotiations between the social democratic party the Greens and the free Democratic Party has started. So it seems that they are quite serious now in, getting involved in a future government, but they have just started the talks and nobody knows what they talk, what the status is. They want to keep this confidentially also ongoing because the fear that it could happen as four years ago, that everything was in the media before they have talked. And at the end they did not really come. Together and they want to avoid that obviously, and now have started the negotiation. We are all looking forward and keen in, in knowing what, what will come out of this.

Richard Sverrisson, Editor-in-Chief, Montel: 1:54

I hear German media using the term speed dating to describe these kind of negotiations. Is that something you would agree with?

Claudia Kemfert, Head of Department Energy, Transportation and Environment, German Institute for Economic Research: 2:01

There has been a speed dating process last week because they the parties have talked between them, all of them. Also the Christian Democrats with the Greens and the Christian Democrats with the SBD and the Free Democrats. So everybody talked to everybody. That was a speed dating phase, but Right, right now it seems. That it's not speed dating anymore. It's becoming more serious. So they're discussing, there are longer talks yesterday and the days before. They have talked longer. And it seems that they are now seriously negotiation, negotiating what might be an agreement what might be a disagreement, and where they have still bridges to go. When do you think an agreement could be reached? Very difficult to say. I think even those parties don't know that yet they are willing to act quickly because Germany needs a new government and they're sure they're aware that this needs to happen quite soon, but soon means that obviously months. So we all hope that by Christmas we know which we have which which government we have we have in the next year.

Richard Sverrisson, Editor-in-Chief, Montel: 3:06

What are the main stumbling blocks in negotiations?

Claudia Kemfert, Head of Department Energy, Transportation and Environment, German Institute for Economic Research: 3:09

It's difficult because previously we analyzed also the different election programs the individual parties have and related to energy policy and climate policy. The social Democrats and the greens are closer than with the free Democrats. The greens obviously want to have a very strong increase of renewable energy quite fast. The emissions need to be reduced in all sectors quite fast. And the social Democrats also want. To go with it. Although the aim to reach carbon neutrality are different and also the speeds they have to go. But nevertheless we have signed the Paris Agreement and have a new climate law, which says that the emissions need to increase decrease quite steeply in the next years. So also the free Democrats need to accept that, and they said, we, we will accept. But the way to reach that, I think there are still debates about whether to increase the share of renewables faster, whether to increase CO2 price even steeper than already agreed on. And also, what's happening to the coal phase out the greens want to have a coal phase out by 2030. The others are not. What might be the outcome of this is completely open. And also related to, also to the transportation changes which we need related to the loading infrastructure for electric cars. What kind of money, how much do we spend also in the infrastructure of electricity of railway system and all the rest. The money that needs to be spent is huge at the Greens that the social Democrats want to create some kind of fund for this in order to have that money right now. But the free Democrats are quite reluctant. They are more willing to negotiate and also to push this system change by market by market drivers. But this is a question how. This could be done by purely market drivers, and I think there will be some kind of a compromise at the end also coming from the free Democrats.

Richard Sverrisson, Editor-in-Chief, Montel: 5:05

So Claudia, do you expect there to be a separate energy and climate ministry and who would be in charge of that? Which party would be in charge of that?

Claudia Kemfert, Head of Department Energy, Transportation and Environment, German Institute for Economic Research: 5:14

Yeah, that's very difficult to say whether we will have a new ministry for climate and energy. The greens initially wanted to have that and I could imagine that they still stick to that and the social Democrats may be as well. However the liberals are not. The question is though whether there will be really a new ministry or whether these full tasks related also to energy changes energy in a given energy transition transportation transition. We need more spendings also to the buildings sector. It all affects different kind of ministries and sectors. Whether all this is bundled in a certain way in the chancellor office with a certain task force for example, that could also be a compromise of it. So it's completely unknown whether there will be a new ministry and the liberals will go for it. And the. Persons related to this nobody knows. I think even they themselves do not know that

Richard Sverrisson, Editor-in-Chief, Montel: 6:09

we're in the midst of a energy crisis at the moment. And certainly across Europe and maybe even globally, with very high gas prices, very high power prices, industries struggling. Some companies on the brink of going bust. Do you think this. Accelerates the discussion around a move to the green transition as in the, investing in renewables? Or do you think there's a way for some to say, oh, we need the backup, we need the gas, we need to keep the lights on in the energy transition? How do you view this? The situation here, Claudia?

Claudia Kemfert, Head of Department Energy, Transportation and Environment, German Institute for Economic Research: 6:40

I would hope that there will be a shift towards more renewables because they bring the prices down. The best answer to this fossil energy crisis, which we have right now related also to oil, coal, and gas, natural gas is the energy transition towards more renewable energy and saving of energy and all sectors in the building sector, in the industry, and everywhere. That would be the answer I would really have. And to see and also in the new government, although their voices saying immediately, okay, we have to change the climate policy. We need to go back to, to nuclear for example, and to shift the whole energy transition backwards. I think that's. The wrong answer to it because everything is driven by fossil fuel. Also, markets and also geopolitical strategies, especially if you look at Russia, but also OPEC countries. We are all always in the same situation again, where the fossil markets explode and we all have to deal with really. Increasing fossil fuel prices. But I would really hope that now we will go on for more renewables, which brings the prices down and also decreases this dependency on the international market, the best energy we could use and produce is in the country domestically. That strengthens also the resilience of the whole economy, the resilience of the energy system, but also makes us less vulnerable on, on fossil energy wars all over the world.

Richard Sverrisson, Editor-in-Chief, Montel: 8:06

I think, they all. The oil price crisis of the 1970s led to a massive investments into, nuclear in some countries and into thermal plants. But the energy crisis of 2021 may then lead to a massive rollout of renewables, which increases, the independence, as you say, Claudia. One should one. One could hope so. But when it comes to the coal exit in Germany, do you expect a new government to be able to set an earlier date than 2038? Could it, could there be a compromise of 2035? Or will the greens get their way, do you think?

Claudia Kemfert, Head of Department Energy, Transportation and Environment, German Institute for Economic Research: 8:39

Yeah, that's really difficult to say because the greens are, is, are the only ones in this co coalition negotiations that want to have an earlier coalface or both other parties not, and they want to stick to this to this negotiated law or coalface outlaw, which we have. And might argue with market driven factors that there are now high CO2 prices, although the core price is also very high. But the gas price as well. So there is a really a shift also towards more coal right now. And not to gas, which is also not the best answer, but it's not that emission intensive as a coal, especially ignite coal. So we will see whether this is really coming to a compromise that some kind of market driven compromise that that they, that might. Be an earlier phase out of coal will happen. I could imagine that the greens will everything that they can do to come to an earlier phase out of coal. But everything depends also what they agree on. The increase of renewable energy, the steeper, we have an increase there. The sooner the coal power plants will also phase out of the market nearly automatically because you don't need that anymore as if you have really a much larger share of renewables in the market.

Richard Sverrisson, Editor-in-Chief, Montel: 9:52

Absolutely. So I want to turn a little bit to gas. It seems that, with Nord Stream two, and there's a lot of geopolitics going on here in the background, do you expect Nord Stream two to be online by Christmas? I don't think the Greens, I don't think there's a discussion now of canceling the project. Is that.

Claudia Kemfert, Head of Department Energy, Transportation and Environment, German Institute for Economic Research: 10:09

Yeah, that's also a very difficult question. I could imagine. Both negotiating parties, the social Democrats and the Liberals wanted to have it fixed as soon as possible. But right now there's more question. The ne negotiations also with the us with the Europe over now it more question to get the permission to get it online. And that's the question of. For the Bunes Nets Argon tour, the net agency, a federal net agency in Germany, and also the European level, which have to get the permission and allow it. And they have the certificates needs to be approved. And this is done now. This will be done now in the next weeks or month so to say. So it's likely that by Christmas we will have we will have the North Stream two pipeline online. Although, Russia wants to push on an earlier start of the pipeline, but they cannot avoid all this bureaucracy around this. And now that, I mean making a lot of. Pressure because they are hiding more gas to bring more gas also via other pipelines like the Ukraine or Poland to Germany and to Europe in order to increase the pressure and driving the gas price even faster to Twin High, which we never expected. And that, that is bad thing out of it. So we always warned that this happens and Russia always puts pressure on the market and all is everything that they can do really to increase this dependency. And we need to stick to this and nor two will be in place. So there's no I think there's no reason why we, or any reason why we should. Really not go for it and take it online by the end of the year.

Richard Sverrisson, Editor-in-Chief, Montel: 11:44

So a new government and and Nord Stream two by Christmas. I dunno whether that's a gift for someone. But some in Germany calling for 20 to 30 gigawatts of gas plants, the, to be built to aid the green transition, to provide the backup when there's no wind or sun, and especially given many coal plants going offline. What's, what are your views here, Claudia?

Claudia Kemfert, Head of Department Energy, Transportation and Environment, German Institute for Economic Research: 12:05

Our studies show clearly that we need to go for 100% renewable energy world. The faster the better. And that means to increase the share of all renewables, all overground Germany as, as soon as possible. And also to increase the storage options with pump hydro storage, with batteries, with the production of green hydrogen or power to extra fuels. That, that is important. And the natural gas is not emission free. Also exploring natural gas increases methane emissions, which is also climate effective. And burning natural gas is also not emission free. So that's not in line with the goals we have the emission reduction goal. So everything we should do is to invest. More into renewables instead of natural gas.

Richard Sverrisson, Editor-in-Chief, Montel: 12:50

So you don't buy this argument that gas should be a sort of bridging fuel into 2030?

Claudia Kemfert, Head of Department Energy, Transportation and Environment, German Institute for Economic Research: 12:54

No, it's a bridge to nowhere. We need to reduce emissions and natural gas is not emission free. And the backup is coming by the renewables themselves, even if there's no or less wind and less solar. We have other options like hydrogen hydro power plants or also pump hydro to storage and other storage options. And also the the strong link we have in the European market. And that's not really a problem. The problem right now in Germany is that we do not. Increase the share of renewables fast enough. We d need to do much more here to reduce the market barriers to have more also areas in Germany where we produce windmills or this bureaucracy needs to be reduced and improved. And also financial system, the financial. System is also important to have more options that that those areas and those cities and areas could, municipalities could benefit also by windmills, for example, and so on. Every rooftop is not that complicated and has also a lot of acceptance. So we are really bad in doing it. We are just talking about it, but not doing it. And that's, that needs really to be changed.

Richard Sverrisson, Editor-in-Chief, Montel: 14:02

And finally, I'd just like to turn to the current sort of energy crisis as it's been called Claudia. You've seen with these record high gas prices, unprecedented power prices, industry is struggling. Some suppliers also. What's your view here, do you think? We've seen some calls for market intervention to, to help industry or to help energy suppliers. What do you think, Claudia, should there be some role for government? Should they provide some support?

Claudia Kemfert, Head of Department Energy, Transportation and Environment, German Institute for Economic Research: 14:27

The best answer to this fossil energy crisis is the energy transition towards more renewables, domestic renewables, which really avoids this and energy saving as well, so that, that is. They really would. What we need to do is a transformation towards more energy efficiency, energy saving, and renewables. There will be a support for sure for the transformation also for the steel industry because they need to invest into a. Green hydrogen as well, that needs to be done and also into energy efficiency. To help them here. There will be certainly a program we also recommended in order to provide also financial help to low income households to use the money coming from the CO2 pricing system to spend it back also per capita to. All the people in Germany that would also, especially the, would also benefit the low income households. And that's one thing. And the other one is really to do everything we could do in order to speed up the energy transition. That needs to be the best answer. And see how long this will take. The energy crisis is coming from different driving factors. But we will see how long this will take. And hopefully we are. Beating up the energy transition much faster than we did in the past.

Richard Sverrisson, Editor-in-Chief, Montel: 15:44

Claudia Kemfert, thank you very much indeed for being a guest on the Montel Weekly podcast. I think your message is loud and clear, build back, greener, and do it much faster. So thank you, Claudia.

Claudia Kemfert, Head of Department Energy, Transportation and Environment, German Institute for Economic Research: 15:54

Thank you for having me.

Richard Sverrisson, Editor-in-Chief, Montel: 15:55

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