New regulation of the energy industry law - will everything be different now?

Climate change, energy transition, security of supply - the topic of energy has never been as relevant and explosive as it is today. While the technical solutions are available, the energy industry is looking eagerly to politics. On the part of the federal government, the task now is to introduce new regulations as quickly as possible that will reduce bureaucracy, accelerate the expansion of renewables and take into account the current supply-related and geopolitical challenges. With numerous new regulations on energy law, the federal government has now formulated its answer to the questions of the day. What was decided in the Bundestag before the summer break? From a market perspective, we take a look at the key points of the biggest energy policy amendment in years.

 An overview of the new energy law

Whether it's the Renewable Energies Act, the Buildings Energy Act or the Energy Security Act - the new provisions of the energy industry law provide for far-reaching changes to numerous legal texts. The federal government has revised more than ten individual laws with the package of measures. Additional regulations and new laws have also been in force since the package came into effect on July 29. The package consists of a total of five amendments for the expansion of renewable energies and two amendments for the strengthening and expansion of precautionary measures. Two core aspects stand out:

1. Speeding up climate policy - with the targets agreed in the coalition agreement and the implementation of the European Union's targets
2. Respond to the current crisis - ensure security of supply in the energy sector, especially in gas supply.

Time is pressing, and so the amendments to the law passed through the parliamentary bodies with astonishing speed. In the context of the revision of the energy industry law, the federal government is pulling various levers. In principle, the entire energy industry and many related laws are affected.

New rules for renewable energy

The heart of the new regulation of the energy industry law is a groundbreaking decision: From now on, the use of renewable energies is in the overriding public interest and serves public safety. The principle thus enshrined in the Renewable Energy Sources Act (EEG) creates an entirely new dynamic in the electricity sector. Renewable energies now have priority in the balancing of protected interests and, for example, in many cases involving nature conservation and species protection. The decision is likely to significantly accelerate expansion in the electricity sector, especially in wind power.

In 2030 - in other words, in just eight years' time - the federal government envisages a demand for renewable power generation in Germany of 600 terrawatt hours, or 80 percent of Germany's gross power consumption at that time. By comparison, today's figure is 240 terrawatt hours. To close this enormous gap, the tender volumes for wind and photovoltaics will be massively increased.

"The targets are ambitious, but not utopian. The capital market is there, and so are the investors."

Frank Höpner, Head of Strategy and Energy Policy, ENGIE Deutschland

New regulation of energy industry law: concern about security of supply

When it comes to natural gas, Germany is taking a clear line: getting away from Russian natural gas as quickly as possible. The cutback in natural gas imports from Russia is hitting the energy industry hard. In fact, the sheer volume of gas imported from Russia to date cannot be substituted by other sources. This poses a real problem for the economy - not least because of rising procurement prices, which threaten to expose utilities to a serious risk of insolvency. Gas prices have almost doubled within a year. However, the new regulation of the energy industry law now allows costs to be passed on to end customers for a limited period.

Good to know: Natural gas plays a role in more than just heat supply. In fact, it is an important pillar of German electricity generation. Ten percent of electricity currently comes from gas-fired power plants. Despite the crisis, it is difficult to impose a production ban on these plants now. Nevertheless, the finance minister is already arguing in favor of stopping electricity production with gas and relying on nuclear power instead. An alternative to nuclear power would be to leave the issue to the market. Retired coal-fired units that have been temporarily reconnected to the grid could produce much more cheaply than gas-fired power plants, which would let the matter sort itself out via supply and demand.

New regulation of energy industry law - a conflict of goals?

The new energy laws do a lot of things right, but many market participants would have liked to see more - especially in terms of reducing bureaucratic hurdles. In any case, it remains obvious that the energy transition and a secure energy supply will not come for free. Rising prices, a lack of capacity and an enormous need for expansion and refurbishment are generating costs on all sides - costs that, in case of doubt, will continue to rise. The federal government must therefore succeed in the triple balancing act of meeting the goals of EU climate policy and at the same time keeping the energy turnaround affordable for producers as well as consumers. As energy experts, we at ENGIE deliver sustainable, cost-efficient and safe concepts for this.