After six intense weeks of negotiations, Germany’s CDU/CSU and SPD parties have reached an agreement to form a new coalition government. The pact ushers in a new political era, with Friedrich Merz (CDU) set to become the next Chancellor, replacing Social Democrat Olaf Scholz. Lars Klingbeil, leader of the SPD, will take on the role of Vice-Chancellor.

The 177-page coalition agreement reaffirms the country's strong commitment to climate protection, adherence to the Paris Agreement, and a transition to renewable energy. However, several sectors have voiced concerns over the lack of concrete measures and the omission of key reforms, particularly regarding the modernisation of electricity distribution networks.

Renewables at the forefront – but no binding targets

The German coalition agreement comes at an opportune moment, as the country aims to achieve climate neutrality by 2045 and has prioritised increasing the share of renewable energy in its electricity supply. Additionally, a 90% reduction in emissions by 2040 compared to 1990 is projected, according to McKinsey & Company.

This recently signed agreement reaffirms the commitment to an energy transition that is transparent and pragmatic, involving more of the economy and consumers, reducing bureaucracy, and promoting shared energy, self-consumption, and citizen-driven energy initiatives. It will harness the full potential of renewable energy, including solar, wind, bioenergy, geothermal, and hydroelectric power, as well as innovative technologies such as wastewater heat recovery and high-altitude wind energy.

However, the agreement does not set a mandatory timeline for the closure of coal plants or a specific price for CO?. Instead, a commission will be established to develop proposals for a gradual phase-out of coal, although these proposals will not be binding.

The agreement also includes the creation of monitoring that, by the summer of 2025, will review electrical demand, supply security, grid expansion, digitalisation, and hydrogen development, with the goal of ensuring an energy transition that is efficient, affordable, and secure.

Criticism over lack of progress on distribution grids

One of the main criticisms from organisations such as the German Wind Energy Association (BWE) is the absence of explicit references to modernising distribution grids—an essential component of the energy transition’s success. While early drafts of the agreement suggested simplified procedures for grid upgrades, the final text merely calls for a review.

“Wind power has been rightly acknowledged, which we welcome. But without a modern grid, even the most ambitious targets will falter,” warned BWE President Bärbel Heidebroek. “We urge swift legislative action before the parliamentary summer recess.”

New measures and investment promises

The agreement includes a commitment to improved regional planning for renewables, sector coupling across heating, mobility and electricity, and a push for storage technologies. It also proposes an investment fund for energy infrastructure and a framework to attract institutional capital into renewables.

Furthermore, the coalition supports “energy sharing” and “citizen energy” initiatives, and plans to enable the direct supply of renewable energy to businesses—helping industry players with their decarbonisation strategies.

A balance between ambition and pragmatism

The new coalition aims for an energy transition that combines innovation, economic competitiveness and social fairness. While the climate commitments remain strong, the lack of concrete action on certain critical fronts could pose challenges to implementation.

In the meantime, Germany prepares for a new political chapter under the leadership of Merz and Klingbeil, with the challenge of maintaining the country’s industrial leadership while meeting its ambitious climate goals.