Lobbying accusation against minister: Reiche's attacks on heat pumps raise questions

Barely in office, Economics Minister Katherina Reiche is causing considerable unrest: regulations on heating conversion are to be abolished and gas-fired power plants are to be introduced. The opposition recalls Reiche's past as chief lobbyist, and the SPD appears contrite.

Is the new Federal Minister of Economics, Katherina Reiche, the extended arm of the gas lobby in the federal cabinet? "I believe that Ms. Reiche is also acting within the terms of the coalition agreement and is not a lobbyist in this federal government," Friedrich Merz's government spokesperson Stefan Kornelius said earlier this week in response to a journalist's question about such allegations. The CDU politician had previously brought her professional past to the fore, even if that wasn't her intention. Reiche's previously presented solutions for Germany's future energy supply or for the future of the heating law she intends to abolish have been conspicuously often: step on the gas!

Reiche is, in fact, something like the Union's demolition officer for the Building Energy Act of her predecessor, Robert Habeck, which was so often cursed by the CDU, CSU, and others. The bundle of individual regulations and funding guidelines, commonly known as the Heating Act, "we will abolish," states the coalition agreement between the CDU and SPD. This meant implementing the Chancellor's party's election promise exactly. "We will repeal the Heating Act," promised the current CDU/CSU parliamentary group leader, Jens Spahn, during the federal election campaign. Then-chancellor candidate Merz announced in December: "We will reinstate the old rules." But Reiche apparently wants to go even further.

"There is a de facto ban on the operation of gas boilers installed before 1991. First, we must abolish this ban," Reiche told "Table Media." She hoped to "bring calm back to the market." Malte Kreutzfeld, a journalist for the same publication, calculated: Just 16,100 of the 19 million oil and gas heating systems in Germany are subject to the ban—that's 0.1 percent. But because, according to her ministry, Reiche only meant old gas heating systems when she lifted the ban, the number of affected radiators is even lower. Not exactly a factor that should cause "unrest" in such a large market.

Furthermore, the ban has nothing to do with the infamous Habeck Act. In an interview with ntv.de, Green Party energy politician Julia Verlinden recalls that the ban on the operation of these heaters was passed under the old coalition government, i.e., with the votes of the CDU/CSU. "That was the right thing to do, also in terms of consumer protection, because these very old, inefficient gas heaters no longer meet the state of the art, are associated with high costs, and are therefore uneconomical." Repealing this regulation now goes beyond Merz's promise to reinstate "the old rules."

From government to business and back

Unlike many other federal ministers who assumed their positions without in-depth knowledge of the subject matter, Reiche is not subject to any kind of 'dog-eat-dog' protection. She knows what she's talking about. After 17 years in the German Bundestag, the Brandenburg native moved to the leadership of the Association of Municipal Utilities (VKU) in 2015, which represents the interests of municipal energy, water, and waste disposal companies. The VKU's voice carries weight whenever new laws and regulations are discussed at the federal level. The next career step followed in 2020: Reiche became CEO of the E.ON subsidiary Westenergie, which claims to be the largest regional operator of distribution networks for water, gas, electricity, and internet.

Given so much expertise, Reiche's announcement in an interview with the "Handelsblatt" that "the compulsion to use heat pumps must end" was surprising. The law stipulates that, starting in 2024, newly installed heating systems must be powered by 65 percent renewable energy. This can be achieved using a variety of technologies. Finally, at the end of 2044, the operating license for all oil- and fossil gas-fired heating systems will expire. This, in turn, is only logical: Germany—the Union has also committed to this goal—aims to be climate-neutral by 2045 and is obligated to do so by international agreements from 2050 onward.

"Very populist and also false statements"

So who's causing unrest in the market right now? Green Party MP Verlinden sees Reiche as more likely to play this role: "The affected industries rightly criticize the new energy minister for making some claims that aren't true. A so-called heat pump requirement, which she wants to abolish, isn't found in any paragraph of the Building Energy Act." The unrest and the CDU/CSU's alleged rejection of heat pumps are also relative. Following last year's significant slump, the German Heat Pump Association (BWP) reported a 35 percent increase in sales in the first quarter and forecasts 220,000 heat pumps sold in Germany this year, despite the economic crisis.

This is a long way from the 500,000 newly installed heat pumps per year that Habeck had set as his target, but at least, according to the BWP, the support measures introduced by the traffic light government in the form of state subsidies have proven their worth. "With these sometimes very populist and even false statements, Ms. Reiche is causing a great deal of unrest in the market, while people and companies need reliable framework conditions and predictability," says Verlinden.

The Social Democratic coalition partner has so far remained largely silent on the issue. When asked by ntv.de, the parliamentary manager of the SPD parliamentary group, Dirk Wiese, at least said: "The heating industry says we can now work with the law." The government must put the debate about heat pumps behind it. At most, "minor changes" are necessary, said Wiese. "The most important principle, and that's what the trades report back, is planning security." How does this fit with the sentence in the coalition agreement that the law will be abolished?

The funding landscape is shaky

Plus, apparently no one quite knows what will replace the Heating Act. Reiche says she doesn't want to prescribe any heating technology in the future and instead focuses on a building's CO2 savings potential. How owners achieve these savings should be left up to them. However, this also puts the current funding framework of up to 70 percent in state subsidies for conversions at risk. Because the subsidies are tied to existing requirements.

Reiche would therefore have to rewrite the entire package. SPD parliamentary group leader Matthias Miersch still reels from the thought of how complicated the negotiations on this matter were with the Greens and FDP. Is this really the top priority of a government that is so committed to a rapid return to a growing economy?

Especially since the SPD, in particular, will not want to forgo the introduced subsidy measures. Starting in 2027, emissions trading will be expanded EU-wide to include heating energy sources such as oil and gas. Prices are likely to continue to rise. The Greens and Social Democrats therefore promoted the Heating Act, not least as a cost brake for consumers. And while the new federal government aims to further reduce electricity costs, and the ongoing boom in renewables is likely to further lower their prices, the price of oil and gas will foreseeably only rise – including sharp fluctuations due to geopolitical events such as the Russian war of aggression.

Is “Lord Voldemort of the Energy Revolution” coming back?

Another personnel change related to the Heating Act is raising eyebrows: Stephanie von Ahlefeldt is set to become head of the Heating Department in Reich's ministry. The Ministry of Economics has yet to confirm the appointment, but the confidante of CDU General Secretary Carsten Linnemann had previously worked in the Federal Ministry of Economics under Peter Altmaier and participated in the negotiations on the coal phase-out. Von Ahlefeldt is remembered by the opposition as a hardliner. In reference to the "Harry Potter" villain, a Green Party politician once referred to von Ahlefeldt as the "Lord Voldemort of the energy transition."

Gas suppliers, however, may welcome Ahlefeldt's possible appointment. Both power plants and grid operators face a real problem as a result of the Heating Act: Gas grids are losing value. And the more people switch away from gas, the higher the grid fees will become for the remaining customers, which could drive even more customers toward alternative heating sources. The liberalization of the Heating Act to include hydrogen heating systems, pushed for by the FDP at the urging of lobbyists, has so far proven to be a mirage: There is neither a foreseeable supply of affordable hydrogen on the open market, nor is there a consistent roadmap for converting the gas grids to hydrogen.

What could give this a boost, however, would be the opening up of hydrogen, which is not only produced from renewable energies such as water, wind, and solar. Reiche, who has already expressed a positive opinion about a return to nuclear power in the past, has long advocated for promoting the market introduction of hydrogen by also using hydrogen produced from nuclear power and gas-fired power plants. Reiche already publicly argued about this with Environment Minister Carsten Schneider in the third week of the federal government's term in office.

Return of gas-fired power plants

Reiche also announced a need for new gas-fired power plants with a total capacity of 20 gigawatts. This would be far more than needed to cushion so-called dark periods – those times when solar and wind power cannot cover demand. Julia Verlinden finds the motive behind this incomprehensible: "Electricity from gas does not lower energy prices, but rather makes them more expensive." Under Habeck, far fewer new gas-fired power plants were planned, and even then, they were only linked to the requirement that they could be converted to hydrogen in the future as soon as there was sufficient and affordable hydrogen on the market. Reiche now appears to be backing away from this requirement, likely even risking conflicts with the EU Commission.

When asked, SPD MP Wiese rejected the gas lobby accusation against Reiche. "It is very questionable whether Ms. Reiche has the necessary distance to decide on important energy policy issues independently of the economic interests of the gas lobby," Verlinden said, referring to Reiche's previous statements. The fact that the Green Party politician views the former gas entrepreneur critically is less surprising than the fact that Reiche is giving her opponents plenty of fodder right at the beginning of her term without specifying her ideas.

But perhaps that's not even necessary. On Wednesday, the coalition committee meets for the first time to finalize the roadmap until the summer break. Reiche faces major tasks: electricity prices must be brought down quickly, as must bureaucratic costs. The heating law may have been important to Merz during the election campaign. But whether he will really push the issue further, given its explosive potential for coalition peace, or whether Reiche will avoid other priority tasks, remains to be seen. Reiche has at least secured the attention of her opponents in her first few weeks in office.