It has long been one of Germany’s biggest challenges: providing affordable and competitive energy prices. The decision to phase out nuclear and coal in order to replace them with renewables poses huge challenges.
Under the leadership of Chancellors Gerhard Schröder and Angela Merkel, cheap Russian gas became a central part of Germany’s energy mix. Even after Russia’s first invasion of Ukraine in 2014 and the annexation of Crimea, Germany failed to reduce this dependence. It built the Nord Stream 2 gas pipeline from Russia to Germany despite strong opposition from European allies and the US.
After the all-out 2022 Russian invasion of Ukraine, Germany went cold turkey when Russia tried to exploit the country’s gas dependency. Energy prices soared. Although Green Minister Robert Habeck managed that crisis well, long-term issues remained unresolved. Growing electricity consumption, due to the “electrification of everything,” has exacerbated the problems.
Germany’s new Chancellor, Friedrich Merz, inherited a complicated hand. His coalition agreed to push the Energiewende, which shifts away from hydrocarbons in favor of renewables, including wind and solar, as well as hydro. But Merz promises “pragmatism.” His government vows to block, for obvious geopolitical reasons, any attempts to reactivate the Nord Stream gas pipelines.
The phase out of nuclear power remains in place. During the electoral campaign, the Christian Democrats signaled support for reversing course. “We hold on to nuclear energy,” the party platform insisted, saying the country should “consider the resumption of operations of the most recently decommissioned nuclear power stations.”
But this pro-nuclear position failed to make it into the coalition agreement. The new Minister for Economy and Energy, Katherina Reiche, did not succeed with early attempts to subsidize nuclear power on the European level. The coalition still promises to develop the world’s first fusion reactor, which is uncontroversial even among most strident nuclear opponents, although the technology remains very, very long-term.
A related crucial challenge is the transition to electric cars. The European Union has set a 2035 ban on the sale of new gas and diesel cars. With the continent’s auto industry cutting jobs and struggling to compete with Chinese electric vehicles, critics began to question whether this might be too quick. An upcoming EU review could open the door for delays. Although the new German government will continue driving down the electric road, it could try to reduce speed, allowing German carmakers time to catch up.
Renewables remain central to Germany’s energy policy – though the path ahead will be fraught with contradictions. Gone is the previous government’s goal of “pushing harder“ for the Energiewende, which translated into massive and successful support of solar and wind energy. The new government pledges to make the green transition “successful in a transparent, predictable and pragmatic way.”
The German public remains committed to supporting renewables. According to a 2024 opinion poll, 76% support increasing the deployment of solar energy. Some 70% approve of wind. The governing coalition pledges allegiance to the German and European climate goals to become carbon neutral by 2045.
But will the goal be attainable with a reduced renewable ambition? The coalition agreement asserts Germany can “remain an industrial power and become climate neutral at the same time,” but the Merz government backed down from its promise to reduce electricity taxes for all businesses and citizens. The proof in the pudding will be in nailing it to the wall.
Like the previous government, Chancellor Merz aims for Germany to become a center for battery research, production, and recycling. He will, budget permitting, subsidize battery production, including access to the relevant raw materials, recycling, and the pertinent machinery and plant engineering. But similar policies have failed in the past. Once bitten, twice shy? Fail again, fail better?
Another priority is hydrogen, though the new government is less interested in emphasizing green hydrogen than in boosting production. Support for carbon capture and storage will be enshrined in law. Energy efficiency receives little attention – the coalition agreement makes no mention of promoting it. Industrial AI could be of great relevance in this context, possibly turning a present weakness into a competitive advantage.
There’s one exciting exception to the modest ambition: plans to build a Hyperloop high-speed transport demonstration system, with pods moving almost at the speed of sound in an airless tube in magnetic fields. It is almost a moonshot! Details about how, where, when, and how it is financed remain to be ironed out.
Overall, though, the watchword is pragmatism. Germany will continue down the same renewable energy path as before, albeit at a slower pace. The transition towards electric vehicles will be pursued with more consideration for the urgent catch-up efforts of German carmakers. Chancellor Merz wants to concentrate on solid, slow steps forward, but ideological battles could return to haunt him. The carbon lobby and energy transition activists will continue to pull him in different directions.
Reinhard Bütikofer is a Senior Fellow with the Tech Policy Program at the Center for European Policy Analysis. Bütikofer previously served as a member of the European Parliament (2009-2024) and was a prominent leader of the European Green Party.
Bandwidth is CEPA’s online journal dedicated to advancing transatlantic cooperation on tech policy. All opinions expressed on Bandwidth are those of the author alone and may not represent those of the institutions they represent or the Center for European Policy Analysis. CEPA maintains a strict intellectual independence policy across all its projects and publications.
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