Dispatch from Germany | May ‘26

Power plant strategy – The government has approved a draft law to introduce auctions for new government-supported gas-fired power plants and other electricity capacity. This to guarantee energy security as the country rapidly builds out wind and solar power, and phases out coal. The plants are meant to serve as a backup for when the sun doesn't shine and the wind doesn't blow. With the first tenders planned for later this year, industry warned the timeline is tight, and environmentalists say the plan risks locking in fossil fuels for decades. Energy companies have previously said that it would take at least five years to connect new gas plant to the grid after the auctions. A report commissioned by the European Energy Exchange (EEX) and several business associations said the strategy carries significant economic, regulatory, and environmental risks. Local utility association VKU also called for changes, saying the current draft favoured a small group of large energy companies.

Fuel tax cut set to expire – Germany’s controversial two-month tax cut on petrol and diesel of 17 cents per litre is set to end at the end of June, sparking a debate over whether to extend the measure. While many motorists hope for continued relief, environmental groups and economists have voiced criticism, saying the measure is poorly targeted and creates the wrong incentives by blunting price signals. They urged the government to let prices rise to discourage fossil fuel consumption, and to encourage a shift to electric and public transport. Social welfare organisation VDK joined the criticisms and said the rebate will cost the federal budget up to 1.6 billion euros, more than its annual contribution to the country’s nationwide flat-rate public transport ticket, which improves mobility and reduces emissions. 

Heating saga, continued – Following repeated delays and inter-coalition quarrelling, the government formally presented legislation to scrap the previous government's heating law and replace it with a looser framework that allows new gas and oil boiler installations to continue. Environmentalists accused the government of cementing Germany’s dependence on fossil fuels in the midst of a fossil energy crisis and increasing emissions, while industry said the reform could finally trigger investments by ending an extended period of legal uncertainty. The reform will now enter parliamentary deliberations. Given the amount of criticism, last-minute changes are a real possibility. Members of chancellor Friedrich Merz's conservatives raised objections to the reform, saying it could be unconstitutional. Several states also protested the plans, as they clash with their more ambitious climate neutrality targets.

Policy headwinds – Broader criticism of the government’s energy policy course continued unabated, as stakeholders started a last-minute push to influence pending legislation. German states’ energy ministers opposed rooftop solar cuts and other decisions, arguing they could deter investments, insisting that they “want to stay the course” on the energy transition. The country’s renewable industry also took a broad swipe at recent government proposals, warning they would deter private citizens and large-scale investors alike and could make many renewable projects impossible to fund. "Whilst the economy ministry is planning to comprehensively worsen the framework conditions for renewables, fossil fuels are to be given preferential treatment," said Ursula Heinen-Esser, head of the Renewable Energy Federation (BEE). The country’s environment agency UBA said the government’s proposed grid reform, aimed at lowering costs, could result in significantly higher subsidies. Germany’s independent Council of Experts on Climate Change said energy policy is on the wrong track, as recent decisions mean the country is on course to miss its 2030 climate targets by a larger margin than previously thought. At least the country is progressing towards its coal phaseout, as it is driven by market forces, a researcher told Clean Energy Wire.

Climate diplomacy shifts gear – Against the backdrop of the energy crisis and geopolitical tensions, diplomatic efforts to address climate change gathered pace. At the invitation of the German government, high-level representatives from around 40 countries convened in Berlin at the Petersberg Climate Dialogue to prepare for November’s UN Climate Change Conference in Turkey (COP 31). German environment minister Carsten Schneider told the gathering that replacing fossil fuels with electrification in many sectors will make economies more resilient, in addition to helping the climate. In that regard, the first-ever conference on the move away from fossil fuels in Colombia in late April was a “milestone”, according to state secretary Jochen Flasbarth, who added the transition was unstoppable.

Baden-Württemberg coalition confirmed – Following their surprise election win, the Greens reached a new coalition agreement with the local branch of Merz’s CDU in Baden-Württemberg, keeping their grip on one of Germany's most powerful industrial states. New state premier Cem Özdemir affirmed the southern state’s target to become climate neutral by 2040, five years ahead of the national target. Meanwhile, neighbouring Bavaria abandoned its 2040 target, arguing it was unworkable.

I will be at this year’s summit by European electricity industry association Eurelectric in Helsinki next week, as part of a Clean Energy Wire media partnership. The conference will cover many urgent issues such as electrification, energy security, as well as competitiveness, and I’m very curious about how geopolitics will reshape the conversation. I will host a networking event for accredited journalists at the end of the first conference day. Are you going too? Get in touch.

With big sporting events coming up this summer, I recommend my colleague Carolina Kyllmann’s reporting on the impact of rising temperatures. Her interview with a health researcher showed me some of the unexpected ways that climate change affects the world of sports.