Industry Trend Analysis - Quick View: Power Sector Compromise Key To 'Jamaica Coalition' - OCT 2017

The Latest: The German federal election held on September 24 delivered a major rebuke to the country's two historically dominant parties, Chancellor Angela Merkel's centre-right Christian Democratic Union (CDU) and the centre-left Social Democratic Party (SPD). The latter registered its worst result in post-war history and has decided to take the role as an opposition party. The result paves the way for lengthy coalition negotiations between Merkel's CDU, the centre-right pro-business Free Democratic Party (FDP), and the centre-left environmentalist Alliance '90/The Greens (Greens). This 'Jamaica coalition' (so called as the parties' colours match those of the Jamaican flag) is the only feasible option that would carry a majority in the now-709-seat Bundestag.

Implications: We believe the power sector will become one of the key topics up for discussion in the upcoming negotiations. The CDU and FDP, which are more closely ideologically aligned, will require support from the Greens in order to establish a majority government. This will see the Greens use its strong bargaining position to get concessions that align with its aims to make Germany close down its coal power sector and accelerate the shift to renewable energy.

  • Coal Reduction Compromise:

Cautious On Coal Phase-Down Amid Nuclear Closures
Germany - Power Generation By Share Of Total Power Mix In 2016e (LHS) And 2026f (RHS)
e/f = estimate/forecast. Source: EIA, BNetzA, BM.

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