German Elections Hold Limited Risk for German Utilities

With the Christian Democratic Union leading the polls ahead of Germany's Feb. 23 elections, the most probable outcome is the return of a coalition government with the Social Democratic Party, which is unlikely to result in a significant shift in German energy policy. The CDU proposes an assessment of reopening the nuclear plants that closed in 2023. We believe this is unlikely because of prohibitive costs and extended timelines. To address the shortage of baseload power capacity, we expect the government to postpone some coal plant closures and introduce the long-awaited capacity market to incentivize the construction of new combined-cycle gas turbines. While the CDU remains committed to Germany's 2045 climate neutrality target, the rapid pace of renewable energy expansion in recent years will likely slow down. This is mainly due to the upcoming parliamentary vote on a bill that would reverse recent approvals for numerous onshore wind projects. However, investment in electricity networks should remain high, as grid expansion is critical to reducing costly congestion.