Realigning the energy policy triangle

A strange discrepancy. On one hand, the energy sector is bursting with vitality. Just a few days ago, E-World in Essen wrapped up with record-breaking success. Europe's leading trade fair in this crucial sector showcased a spectacular array of innovations that left me thoroughly impressed. At the same time, Germany is living up to its reputation as a pioneer in the energy transition. Nearly 60 percent of the electricity here now comes from renewable sources, highlighting the nation's commitment to green energy.

On the other hand, a sluggishness has taken hold in the energy system, throwing the energy policy triangle off balance. At the moment, it consists of a pronounced hypotenuse of “environmental compatibility”, while the legs of “supply security” and “economic efficiency” remain noticeably short.

I see an imbalance here that harms energy-intensive industries like the chemical sector. Take supply security: The sector is now, and even more so in the future, dependent on the reliable provision of large quantities of climate-friendly produced electricity to energize processes and generate process heat in a climate-neutral way.

But uncertainties aren’t just looming on the horizon tomorrow or the day after. Even today, the sector is facing an existential crisis due to internationally non-competitive energy prices: Electricity in Germany is up to five times, and gas even up to seven times more expensive than at competing locations in other countries. My idea of economic efficiency is quite different.

Integrated electricity market design

It's high time to realign the energy triangle. The federal elections in Germany can and must be the catalyst for this. What is needed is a new, sustainable overarching concept in energy and climate policy. An integrated electricity market design is required to quickly advance the expansion of grids, storage, and reserve power plants. Additionally, renewables need to be better integrated into the electricity system, and smart reforms in grid fees must be initiated. This is crucial because the chemical industry, in particular, can only very limitedly diversify its production.

And the affordable supply of (sustainable) raw materials such as hydrogen, biomass, recycled materials, and CO₂ must also be ensured. This requires, among other things, a convincing strategy for the storage and use of CO₂ – many of Germany’s European neighbors are already setting precedents in this area.

CO₂ price as a control element

Above all, the transformation must be as efficient and cost-effective as possible. In my view, the best way to achieve this is through a technology-neutral central control element: a uniform CO₂ price within the framework of the European Emissions Trading System. This approach would help achieve climate neutrality and the energy transition at the lowest CO₂ avoidance costs, based on market economy principles.

It will certainly take some time for fundamental reforms like these to take effect. Until then, the competitiveness of the industry must not be allowed to erode further. In the short term, action must be taken where the pressure is greatest, but also where the possibilities are significant: in electricity costs. There are many sensible proposals on the table. For example, capping transmission grid fees through temporary cross-financing from the federal budget. Or permanently reducing the electricity tax to the European minimum.

The next federal government must act decisively to preserve and strengthen the industry. Because without a strong industry, not only growth and prosperity are at risk. Without it, Germany’s goal of climate neutrality cannot be achieved. And that, in turn, is essential for competitive reasons. Because renewable energies and sustainable future technologies are the future. And Germany should make its know-how in this area an export hit.

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