Controversial monitoring contract: How Katherina Reiche is driving forward the "reorientation of the energy transition"

Since taking office, Economics Minister Reiche has been dogged by suspicions of trying to slow down renewables in the interests of large energy companies. A study she commissioned further fuels this skepticism.

"The next federal government must take a fresh look at the expansion scenarios for energy," said Katherina Reiche in mid-April. The current Federal Minister for Energy and Economic Affairs was still an energy manager when she appeared on Essen's mayor, Thomas Kufen's, podcast. A week later, it was announced that Reiche would be a member of the said federal government. She can now implement her demands herself: A final report on what a "reorientation of Germany's energy policy" could look like is expected by the end of August. This so-called monitoring will have consequences—many fear that they will be detrimental to the energy transition.

On Tuesday, the German Environmental Aid (DUH) published a paper detailing Reiche's ministry's monitoring requirements. The paper confirms those who expect nothing less than an attack on the expansion of renewable energies from the CDU politician. "Katherina Reiche has ideological blinders on: Instead of driving innovation and the renewal of the business location in key areas, she apparently wants to manage standstill and stagnation," DUH Managing Director Sascha Müller-Kraenner commented on the report.

Both the contract description and the awarding of the contract to an institute whose founding history is said to have intellectual affinity with the fossil fuel industry are raising eyebrows in expert circles: The Energy Economics Institute at the University of Cologne (EWI for short) was originally primarily funded by the energy giants RWE and Eon. Eon is also the parent company of the distribution grid operator Westenergie. Reiche most recently headed the business there before being appointed to the federal cabinet by Friedrich Merz because CDU General Secretary Carsten Linnemann did not want to succeed Robert Habeck.

Shaking up the climate targets

Reiche's biographical proximity to the major energy suppliers has made her suspect in the eyes of her critics since day one. The Federal Minister responds to such accusations with irony. When the 51-year-old delivered a welcoming address at the congress of the German Association of the Energy and Water Industries in early June, she said, referring to the lobbying-critical organization: "Perhaps I can also say: Dear former colleagues! But then Lobbycontrol will scream again."

There is indeed an outcry, and it could get even louder, because Reiche is undermining Germany's legally enshrined goal of climate neutrality by 2045. She repeatedly advocates for "harmonization with international goals." In other words, Germany, like other signatories to the Paris Agreement, should only aim for climate neutrality by 2050. Reiche's main arguments are the costs, feasibility, and social acceptance of the climate transition. Reiche is supported by Veronika Grimm, an economic advisor to her. "In my view, it would be crucial to achieve the EU's 2050 target as cost-effectively as possible," Grimm told the "Süddeutsche Zeitung." Germany is not on track for 2045 anyway, and Germany should "not fight for that date either."

Reiche has the chancellor on her side, but not her coalition partner, the SPD. The minister's demand has "something to do with a realistic assessment of what we can actually achieve," commented Friedrich Merz on the "Maischberger" TV show. Federal Environment Minister Carsten Schneider counters: Germany's CO2 neutrality by 2045 is "a central project of the federal government," the SPD politician said midweek in Munich . The issue will certainly have explosive potential for the coalition in the coming months, which aims to distance itself from the ongoing disputes of the previous government. The monitoring report, which is intended to support Reiche's future energy policy with arguments where her opponents suspect "ideological blinkers," is now of corresponding importance.

Detailed instructions for study authors

But the entire monitoring process itself is striking. In the contract description to the EWI and BET Consulting GmbH, Reiche's ministry itself describes an "extremely ambitious schedule." The contract will be finalized at the end of June, the draft report is set for the end of July, and the final report is to be completed by the end of August. However, the authors are not supposed to reinvent the wheel, but rather base their work on existing studies, a whole series of which are explicitly listed. The key question of the monitoring is "whether a realignment of energy policy is necessary to minimize costs and ensure security of supply when implementing national and European climate targets," according to the BMWE.

It further states: "The options for action to be developed are not tied to the federal government's previous target scenarios. A critical examination of these scenarios and their assumptions is explicitly desired." None of the 13 pages asks about possibilities for accelerating the energy transition. "The central evaluation criterion is the minimization of overall system costs," the BMWE writes regarding possible options for action.

A key, highly controversial figure in expert circles is Germany's future electricity demand. The Energy Transition Monitoring program is intended to determine this as well – and according to the BMWE, it should be compatible with the maintenance and further development of Germany's industrial structure and the expected pace of electricity grid expansion. The "expected pace" is different from the potential pace. Reiche could also ask how her ministry could further minimize barriers to expansion and create appropriate incentives for the industry.

Another factor here is the heating transition: If more and more people heat their homes with electricity in the future, demand will grow. But what the federal government is planning, which, according to the coalition agreement, intends to "abolish" the Heating Act, seems to be unknown even to the wealthy, and certainly not to the study authors. Also striking is that the BMWE is demanding that the report's authors establish an "advisory group" made up of scientists and people "from the energy industry." The draft of the final report is to be presented to this group. The ministry reserves the right to have a say in the composition of the group.

The increase in renewable energy is already too much for the rich

According to the contract description, the rapid expansion of renewable energies is overloading the power grid and thus causing high costs. The monitoring should therefore clarify whether "there is a need for adjustments to the schedules and planned commissioning." Reiche already has a clear opinion on this. At the most important annual event of the Federation of German Industries (BDI), the minister spoke of a "completely unrealistic, completely excessive renewable energy target."

Reiche also apparently already has in mind what the "reorientation of energy policy" should look like: In the future, the expansion of electricity from wind, hydropower, and solar should be aligned with transmission and distribution grid capacities, not the other way around. Reiche also wants companies that earn money from renewable energies to contribute to the costs of grid expansion. The Federal Network Agency (BNetzA) has initiated a corresponding procedure to determine ways to implement this.

Rapidly growing costs of the energy transition

In fact, the expansion of renewable energies is booming, partly due to the legally guaranteed profitability of the business, whether on land or at sea. Taxpayers shelled out exactly €554 million last year for curtailed green power plants alone. The EEG surcharge, which guarantees providers a fixed remuneration per kilowatt-hour of electricity fed into the grid, resulted in costs of €18.5 billion in 2024.

Added to this are the grid fees for maintaining and expanding the electricity grid. These amount to billions of euros and account for about a quarter of the consumer electricity price. To ease the burden on consumers, the federal government plans to contribute more than 6 billion euros starting this year, but the grid fees could still further increase electricity prices. Due to the high grid expansion costs, grid fees could rise by another 30 percent over the next ten years, according to estimates by the private research institute Agora Energiewende.

What are the consequences of monitoring?

While consumers and taxpayers are already massively subsidizing increasingly green electricity, the economy is suffering: High electricity prices not only reduce purchasing power and dampen domestic demand, but also hurt the business environment. From small and medium-sized businesses to large corporations, companies are complaining about Germany's persistently high electricity costs compared to other countries.

Against this backdrop, business associations, grid operators, and research institutes have recently put forward numerous proposals on how grid expansion could be reprioritized without undermining short-term expansion targets for the share of renewable energies. This is where Katherina Reiche could start.

However, if the study primarily comes to the conclusion that the forecast future electricity demand can be set significantly lower and that more gas-fired power plants are needed now to ensure grid stability and deal with periods of low electricity production, the energy transition monitoring is likely to confirm the fears of Reiche's opponents: In that case, the statements in the report are likely to be read primarily in the light of its production - short-term, narrowly defined, and by an institute that is not perceived as non-partisan and independent.