With the retaliatory tariffs imposed by President Biden earlier this week on a range of Chinese products, tensions in global trade have once again escalated significantly. US media, reminiscent of the Trump era, are once again talking about a “trade war” between the US and China.
EU Commissioner for Industry Thierry Breton fears collateral damage in Europe. “We could see some volumes, particularly of mature semiconductors, being diverted to Europe and putting some of our companies at risk,” he said yesterday in an interview with Table.Briefings.
Breton called for a robust EU response in light of the policies of the US and China. If Europeans were the only ones still adhering to the rules of the World Trade Organization, “then we are dead, then we will be the last of the Mohicans”. While they do not want to start a trade war, they cannot ignore the situation either.
Yesterday, it was announced through publication in the EU Official Journal that the EU Commission is initiating two new anti-dumping investigations against China – one for imported tinplate and strips and another for multi-layered wooden flooring. Both investigations stem from complaints filed by industry associations.
Pressure is also mounting from the industry to take action against Chinese industrial policies. Because the devil of trade wars is that unilateral disarmament often yields as little as in conventional wars. One cannot participate and still lose.
However, in a trade war, the EU has more to lose than the US. The EU economy is much more dependent on global demand due to its trade surplus, compared to the US, which can rely on strong domestic demand.
Mister Breton, you discussed the satellite-based connectivity project Iris² with Minister Habeck. He thinks that the project is becoming too expensive…
Iris² was not the reason for my visit. It is a formal procurement, and everything is done by the rules. The co-legislators decided that the backbone would be financed by EU funds. It is a very important project for governments and defense. I had a good discussion with some Members of the Bundestag. They think it is so critical that they want to have it run as soon as possible. We realized the urgency during the war in Ukraine, the aggression from Putin.
The urgency is clear, but it should be done the right way.
Based on the decisions of the co-legislator, ESA runs the official procurement. There is no state interference by law and the law will be respected. We have an independent body carrying out the tender. And so far, I believe things are going in the right direction. We must wait for the outcome. There are a lot of KPI’s. For example, the fact that SMEs and start-ups cover a minimum of 30 percent. I make sure that the requirements of the law will be respected. No doubt.
The US has just raised the tariffs on electric vehicles from China to 100 percent. Does that increase the pressure on the EU to act?
First, we didn’t wait for the US government to start our own procedure on electric vehicles from China. Second, the investigation is run by the services of my colleague Valdis Dombrovskis, and there is no interference. We expect the outcome in the next few weeks.
Before or after the European elections?
I don’t know. The deadline is early July, and I don’t want to speculate. We have seen that the US has increased the tariffs on EVs to 100 percent. But I think that the number of cars concerned is close to zero. Of course, it’s easier to tax zero or close to zero cars.
What about the concerns that Chinese manufacturer might still redirect their exports to Europe.
That’s a fair point. Even if it’s about thousands or maybe tens of thousands of cars, you cannot say that they will be redirected if they are not sent there. But what we need to take into consideration is something important that has been discussed with Minister Habeck and the Chancellery this morning, that we have also seen an increase of US tariffs on semiconductors from 25 to 50 percent, especially on mature semiconductors. We could see some volumes of these mature semiconductors being redirected to Europe and putting some of our companies at risk.
Do you see an immediate need to react?
No, since we don’t have any material facts now. But it shows, again, that our trade instruments should be closely linked to our industrial policies and the internal market. That’s something I discussed with Robert Habeck.
How do you address the concerns raised by Habeck and others that German industry might be adversely affected by possible Chinese retaliation?
We have to take it as a reality that, unfortunately, the behavior of a lot of our regular partners is not playing by the rules of the WTO anymore.
That’s true even for the Biden administration.
The latest example is, of course, what’s happening in the US. So, we cannot continue to be naive and say, yes, but we will be the only one playing by the rules. Because if we are the only ones, we are dead, we will be the last of the Mohicans. Of course, we need to sit together and find the appropriate way. Of course, we don’t want to enter a trade war. But we cannot ignore the situation.
You mentioned industrial policy and the single market. One of the ideas being discussed is creating bigger companies, bigger telecom players for example. Is that a good idea? Or would it just raise prices for consumers?
Regarding the telecom players, we are trying to get a joint vision of what we need, to make sure that we will be able to achieve all the goals of the Digital Decade by 2030 in terms of network infrastructure for telecommunications. Our whitepaper is out. Based on this paper, we believe a Digital Network Act is very important. And it will hopefully be put high on the agenda by the next commission. By the way as you have seen, it has been also one of the main outcomes of the Letta report: reinforce the internal market, the capital union, global energy policy and global telecom policy through the Digital Networks Act.
So how is the feedback to the whitepaper?
Good. We spent a lot of time on discussions with all the stakeholders involved. I think that everyone understands that it is extremely important. There is an understanding and an appetite to move forward. But of course, this will be a topic for the next commission.
Another idea that might be on the agenda for the next term is the idea of President Macron to regulate screen time for adolescents. What do you think of it?
We have already put horizontal regulations in place for the big platforms. With the DSA we now have the backbone, and we can add more specific regulation if we believe there is a strong request from all the member states. For now, our priorities have been to look at addiction, the rabbit-hole effect, age verification, and so on. As you can see in our formal proceedings against Meta. But if screen time is a growing concern for many Member States, it is easy for us to plug it in.
Back to the old industry. There is this demand from the EPP in the election campaign to take back the CO2 car regulation. Is that something you support?
It’s been a decision that has been voted on by the Parliament and the Council to put the end date on 2035. I respect that one hundred percent. But we need to make sure that we get to it. Therefore, I decided that it was extremely important to convene all the stakeholders involved.
But the uptake seems to be much slower than expected.
You’re absolutely right. That’s why we have decided to publish some KPIs every three months. Now we see what we need to do, putting more emphasis on chargers, on batteries or on cost for consumers. On many KPIs, we are late regarding our objectives which means that we need to reinforce our efforts.
Should the review clause be triggered already in 2025 instead of 2026?
By law, the review has to be carried out in 2026. I think 2026 is a good time frame.
Ursula von der Leyen promised to reduce reporting requirements by 25 percent. Is something still to happen in this mandate?
I have been pushing for this from day one in the commission. At the beginning, it didn’t receive much echo but finally, we have it. The objective is extremely important.
But what about concrete measures?
It’s always the way we work: We need to have the global objective. And then we put everybody in motion. For example, I have been pushing hard that for every single policy that we propose, the commission has to produce an impact assessment to see the burden on SMEs. Finally, it was accepted. I have no doubt that it will be very high as a priority of the next commission to reduce this burden which is really important for our competitivity. We also tell ministers as we tell industry to come up with very concrete points that need to be improved.
“We are making history together, and the sun will shine over the Netherlands again,” Geert Wilders began as he presented the coalition agreement. The deal is indeed historic, as it will be the first time that a right-wing extremist politician with his one-man party will be part of the government in the Netherlands. Moreover, for the first time, no party leader from the future four-party coalition will lead the government. It is a double experiment with an uncertain outcome.
Six months after winning the parliamentary elections, Wilders has reached his goal with his Freedom Party (PVV). For the right-liberal VVD of outgoing Prime Minister Mark Rutte, the conservative NSC of Pieter Omtzigt, and the right-wing populist Farmers’ Movement BBB of Caroline van der Plas to agree to the coalition, the election winner had to forgo the position of Prime Minister. However, this concession may ultimately benefit Wilders. He will be able to act as both government and opposition, pushing the coalition as a member of parliament and through social media.
In the Netherlands, the firewall of conservatives and liberals against the far right is falling. This is a signal for all of Europe, especially with the European elections coming up in a month. The compromise with the far-right is unacceptable, responded Valérie Hayer, chair of the liberal Renew Europe group in the European Parliament. Wilders’ PVV stands in opposition to nearly all of Renew’s positions. The French politician announced that Renew will discuss its future course of action after the European elections.
EPP group and party leader Manfred Weber also faces a dilemma. The new NSC of Pieter Omtzigt and the Farmers’ Movement BBB would actually fit well into the EPP group. However, the coalition agreement with the Islam critic and EU opponent Wilders could jeopardize these plans. Although Wilders will not lead the coalition himself, he will have the right to nominate the Prime Minister. The latest suggestion is Ronald Plasterk, a Social Democrat who has shifted significantly to the right in recent years. The cancer researcher and head of a cancer therapy company served as a minister for the PvdA between 2007 and 2017 in various coalition governments.
Besides Wilders, other party leaders are also forgoing government positions. The future Prime Minister will need thick skin to balance the tensions between coalition partners. It is not for nothing that the negotiations took six months and almost collapsed several times. Wilders had to make concessions, scaling back the most radical positions in his party’s platform. Anything not in line with the constitution will be put on ice, he promised. This includes banning the Koran and the construction of mosques. There will also be no EU exit referendum or departure from the Euro.
The 26-page coalition agreement is titled “Hope, Courage and Pride”. Reaching an agreement on finances was difficult until the end. Wilders wants to spend money generously, while the right-liberal VVD and the right-conservative NSC insist on a balanced budget. The result is a compromise, but it is unclear if the calculations will add up. The coalition plans to cut income taxes and halve health care deductibles. Savings are planned in public service, development aid and transfers to Brussels.
At the same time, the two-percent target for defense spending in line with NATO guidelines will be enshrined in law. Remarkably, support for Ukraine will not be cut and the Dutch embassy in Israel will be moved from Tel Aviv to Jerusalem. The climate and nitrogen policies will be relaxed, with less funding for renewable energy and a return to a 130 km/h speed limit on highways. The policy to reduce livestock, which had led to farmer protests, will not continue.
The biggest potential for conflict with Brussels and European partners lies in asylum and migration policy. The coalition aims for a temporary opt-out from EU rules. The Netherlands had just agreed to the reform of asylum and migration policy, said an EU Commission representative. Exceptions are not foreseen. The coalition plans to suspend the processing of asylum applications, massively restrict family reunification, cut legal aid, and allow asylum seekers to appeal to only one court without further recourse.
The coalition also intends to halve labor migration and reduce the proportion of foreign students at universities, which has increased significantly since Brexit. How this aligns with free movement of people is one of many unanswered questions.
Tennet is considered a candidate for a takeover by the federal government. Would that be a step towards a Deutsche Netz AG – in other words, the nationalization of the entire German power transmission network?
I am sure you will understand that I cannot comment on ongoing negotiations. Tennet is already completely state-owned – just by the Dutch state – and the four German transmission network operators work closely together. I would not see any significant differences in the event of a possible sale to the federal government. The Dutch government has always ensured financing and supported us very well. The motivation of the German side for acquiring network operators has always been to guarantee long-term financing for network expansion. Germany faces over 300 billion in investments in the transmission network area alone, and about 500 billion if you include distribution networks.
The Netherlands apparently wants to sell because they do not want to invest on this scale in the German network. Who should finance the expansion?
As a network operator, we are essentially financed by debt and long-term access to the capital market is what concerns me more. At the beginning of the year, the Federal Network Agency further reduced the return on equity for all German network operators, while other European regulators have tended to increase equity returns. However, we compete in the capital market with many other infrastructure operators in Europe. If the equity ratio goes down, it will affect the rating and make debt capital correspondingly more expensive. I therefore believe that the Federal Network Agency will not achieve its goal of lowering network charges this way. On the contrary, if in doubt, network charges will tend to rise. This is where we need to act.
However, every network operator has been demanding a higher return on equity since regulation began. Now, such high investments are needed that Federal Minister for Economic Affairs Robert Habeck has suggested a time extension in the interest of electricity customers.
The basic idea is good and right. We are restructuring our entire energy system, and it would be pragmatic to spread the costs over several generations. However, it must be sensibly designed. Just as with the hydrogen core network, an amortization account for the electricity networks will not work. We have a significantly higher investment volume to manage – we are talking at least about a factor of 20. The incentives for investors must be different. With fully regulated operators, an amortization account will not be feasible. We need new solutions for liability issues and risk distribution.
Would a risk assumption by the European Investment Bank help, or higher subsidies from an expanded Connecting Europe Facility?
These can be useful supplements, especially when I think about projects for European interconnection. However, state funds and guarantees will not be sufficient for the task we have ahead of us. Most importantly, we need to secure and expand access to private capital through regulatory frameworks such as a deeper capital markets union and especially the return on equity.
You are under great pressure for network expansion. By the end of 2026, transport lines must meet European electricity trading requirements – otherwise, a split of the German electricity price zone looms. Recently, the Federal Network Agency reported successes with faster approvals. Will you achieve the EU goals?
The goal of reserving 70 percent of line capacities for European electricity trading from 2026 is still very challenging for network operators. We are on track to expand the transmission lines in both AC and DC areas faster. However, the major DC corridors – particularly SuedLink and SuedOstLink for us – will not be available until 2027 and 2028. These lines are the prerequisites to reduce bottlenecks in the German network. Despite all the challenges, we are currently managing to annually increase the minimum capacities for cross-border electricity trading as prescribed.
Will there be a split of the German bidding zone?
In the end, it is a political decision. The question remains how helpful a re-division of the bidding zones is at a certain point. With the completion of major DC corridors, the situation will fundamentally change repeatedly, and new price zones will not have an immediate steering effect. A bidding zone split is a long-term process in a very dynamic environment, so considerable political discussions will be necessary.
To accelerate approvals, laws have often been adjusted in recent years – most recently in Brussels through an emergency ordinance and the Renewable Energy Directive. Do you see any further possibilities?
The work of the federal government and the EU has helped us a lot in many areas. There are still minor adjustments where we see further potential. For the DC corridors, there are an enormous number of heavy transports for cables, and the approval procedures for these transports are incredibly lengthy, with each transport requiring individual approval. However, the lawmakers have tackled the major tasks for accelerated network expansion.
Really? Influential advisors are proposing a central European institution for network development. Bruegel has proposed an Independent Network System Operator and Enrico Letta suggested a Clean Energy Delivery Agency in his internal market report. Do we need genuine European network planning?
The European transmission network operators already work closely together in ENTSO-E. We jointly deliver the ten-year network development plan and have recently laid the foundation for hybrid connections of offshore wind farms to multiple EU states. I see no need to create new bureaucracy. Cross-border planning of transmission lines can be better regulated by the member states through regional coordination. A good example is the North Sea energy cooperation, in which the neighboring states cooperate. I do not see deficiencies in the energy internal market on the planning side, but rather in the market order.
Please explain that.
Taking the North Sea as an example, each country today has its own market model. The yield of a wind farm always depends on which country it is connected to. If an offshore grid is supposed to connect both wind farms and countries, it is unclear to wind farms which market rules they will be remunerated under and what securities they have. We need harmonization of market rules in Europe so that it does not matter where offshore wind farms are connected to the European grid. The same applies to interconnectors. So far, we have to laboriously align the regulations of the participating states. If the national electricity markets had a unified market framework, we could save a lot of time in building cross-border lines.
What needs to change for this?
First, we need a clear political commitment to connect the national electricity markets according to uniform rules. And we need the political will to fairly share costs and benefits without prioritizing national interests.
Network operators have a lot ahead of them in the North Sea. By 2050, neighboring countries want to connect 300 gigawatts of wind farms, with Tennet alone responsible for around 100 GW. Will offshore be the next bottleneck in network expansion?
For offshore connections, it is very important to have a steady demand so that manufacturers can plan accordingly. We have signed long-term contracts with producers to enable them to invest in additional production capacities early on. As Tennet, we have also responded early and developed a new technical standard that enables grid connections with two gigawatts – which means transporting twice as much power as before. However, the German exclusive economic zone is very limited in space. Many studies now show shading effects of wind farms in the North Sea because the BSH has significantly condensed the expansion in the 2023 area development plan due to political targets.
If the distances between wind farms are not large enough, a wind farm can slow down the wind for another farm behind it.
The densification of offshore wind farms off the German coast leads to shading and significantly reduced power yields. We see the need to reconsider whether this densification is sensible. Not for the systems already in the tender process, but for the future, it might be sensible if the BSH adjusts the area allocations again. European spatial planning authorities also need to coordinate with their neighbors. We see shading effects from Dutch on German wind farms or from Danish on German and vice versa. In planning offshore wind farms, there is still great potential for cost reduction through European cooperation.
With the retaliatory tariffs imposed by President Biden earlier this week on a range of Chinese products, tensions in global trade have once again escalated significantly. US media, reminiscent of the Trump era, are once again talking about a “trade war” between the US and China.
EU Commissioner for Industry Thierry Breton fears collateral damage in Europe. “We could see some volumes, particularly of mature semiconductors, being diverted to Europe and putting some of our companies at risk,” he said yesterday in an interview with Table.Briefings.
Breton called for a robust EU response in light of the policies of the US and China. If Europeans were the only ones still adhering to the rules of the World Trade Organization, “then we are dead, then we will be the last of the Mohicans”. While they do not want to start a trade war, they cannot ignore the situation either.
Yesterday, it was announced through publication in the EU Official Journal that the EU Commission is initiating two new anti-dumping investigations against China – one for imported tinplate and strips and another for multi-layered wooden flooring. Both investigations stem from complaints filed by industry associations.
Pressure is also mounting from the industry to take action against Chinese industrial policies. Because the devil of trade wars is that unilateral disarmament often yields as little as in conventional wars. One cannot participate and still lose.
However, in a trade war, the EU has more to lose than the US. The EU economy is much more dependent on global demand due to its trade surplus, compared to the US, which can rely on strong domestic demand.
Mister Breton, you discussed the satellite-based connectivity project Iris² with Minister Habeck. He thinks that the project is becoming too expensive…
Iris² was not the reason for my visit. It is a formal procurement, and everything is done by the rules. The co-legislators decided that the backbone would be financed by EU funds. It is a very important project for governments and defense. I had a good discussion with some Members of the Bundestag. They think it is so critical that they want to have it run as soon as possible. We realized the urgency during the war in Ukraine, the aggression from Putin.
The urgency is clear, but it should be done the right way.
Based on the decisions of the co-legislator, ESA runs the official procurement. There is no state interference by law and the law will be respected. We have an independent body carrying out the tender. And so far, I believe things are going in the right direction. We must wait for the outcome. There are a lot of KPI’s. For example, the fact that SMEs and start-ups cover a minimum of 30 percent. I make sure that the requirements of the law will be respected. No doubt.
The US has just raised the tariffs on electric vehicles from China to 100 percent. Does that increase the pressure on the EU to act?
First, we didn’t wait for the US government to start our own procedure on electric vehicles from China. Second, the investigation is run by the services of my colleague Valdis Dombrovskis, and there is no interference. We expect the outcome in the next few weeks.
Before or after the European elections?
I don’t know. The deadline is early July, and I don’t want to speculate. We have seen that the US has increased the tariffs on EVs to 100 percent. But I think that the number of cars concerned is close to zero. Of course, it’s easier to tax zero or close to zero cars.
What about the concerns that Chinese manufacturer might still redirect their exports to Europe.
That’s a fair point. Even if it’s about thousands or maybe tens of thousands of cars, you cannot say that they will be redirected if they are not sent there. But what we need to take into consideration is something important that has been discussed with Minister Habeck and the Chancellery this morning, that we have also seen an increase of US tariffs on semiconductors from 25 to 50 percent, especially on mature semiconductors. We could see some volumes of these mature semiconductors being redirected to Europe and putting some of our companies at risk.
Do you see an immediate need to react?
No, since we don’t have any material facts now. But it shows, again, that our trade instruments should be closely linked to our industrial policies and the internal market. That’s something I discussed with Robert Habeck.
How do you address the concerns raised by Habeck and others that German industry might be adversely affected by possible Chinese retaliation?
We have to take it as a reality that, unfortunately, the behavior of a lot of our regular partners is not playing by the rules of the WTO anymore.
That’s true even for the Biden administration.
The latest example is, of course, what’s happening in the US. So, we cannot continue to be naive and say, yes, but we will be the only one playing by the rules. Because if we are the only ones, we are dead, we will be the last of the Mohicans. Of course, we need to sit together and find the appropriate way. Of course, we don’t want to enter a trade war. But we cannot ignore the situation.
You mentioned industrial policy and the single market. One of the ideas being discussed is creating bigger companies, bigger telecom players for example. Is that a good idea? Or would it just raise prices for consumers?
Regarding the telecom players, we are trying to get a joint vision of what we need, to make sure that we will be able to achieve all the goals of the Digital Decade by 2030 in terms of network infrastructure for telecommunications. Our whitepaper is out. Based on this paper, we believe a Digital Network Act is very important. And it will hopefully be put high on the agenda by the next commission. By the way as you have seen, it has been also one of the main outcomes of the Letta report: reinforce the internal market, the capital union, global energy policy and global telecom policy through the Digital Networks Act.
So how is the feedback to the whitepaper?
Good. We spent a lot of time on discussions with all the stakeholders involved. I think that everyone understands that it is extremely important. There is an understanding and an appetite to move forward. But of course, this will be a topic for the next commission.
Another idea that might be on the agenda for the next term is the idea of President Macron to regulate screen time for adolescents. What do you think of it?
We have already put horizontal regulations in place for the big platforms. With the DSA we now have the backbone, and we can add more specific regulation if we believe there is a strong request from all the member states. For now, our priorities have been to look at addiction, the rabbit-hole effect, age verification, and so on. As you can see in our formal proceedings against Meta. But if screen time is a growing concern for many Member States, it is easy for us to plug it in.
Back to the old industry. There is this demand from the EPP in the election campaign to take back the CO2 car regulation. Is that something you support?
It’s been a decision that has been voted on by the Parliament and the Council to put the end date on 2035. I respect that one hundred percent. But we need to make sure that we get to it. Therefore, I decided that it was extremely important to convene all the stakeholders involved.
But the uptake seems to be much slower than expected.
You’re absolutely right. That’s why we have decided to publish some KPIs every three months. Now we see what we need to do, putting more emphasis on chargers, on batteries or on cost for consumers. On many KPIs, we are late regarding our objectives which means that we need to reinforce our efforts.
Should the review clause be triggered already in 2025 instead of 2026?
By law, the review has to be carried out in 2026. I think 2026 is a good time frame.
Ursula von der Leyen promised to reduce reporting requirements by 25 percent. Is something still to happen in this mandate?
I have been pushing for this from day one in the commission. At the beginning, it didn’t receive much echo but finally, we have it. The objective is extremely important.
But what about concrete measures?
It’s always the way we work: We need to have the global objective. And then we put everybody in motion. For example, I have been pushing hard that for every single policy that we propose, the commission has to produce an impact assessment to see the burden on SMEs. Finally, it was accepted. I have no doubt that it will be very high as a priority of the next commission to reduce this burden which is really important for our competitivity. We also tell ministers as we tell industry to come up with very concrete points that need to be improved.
“We are making history together, and the sun will shine over the Netherlands again,” Geert Wilders began as he presented the coalition agreement. The deal is indeed historic, as it will be the first time that a right-wing extremist politician with his one-man party will be part of the government in the Netherlands. Moreover, for the first time, no party leader from the future four-party coalition will lead the government. It is a double experiment with an uncertain outcome.
Six months after winning the parliamentary elections, Wilders has reached his goal with his Freedom Party (PVV). For the right-liberal VVD of outgoing Prime Minister Mark Rutte, the conservative NSC of Pieter Omtzigt, and the right-wing populist Farmers’ Movement BBB of Caroline van der Plas to agree to the coalition, the election winner had to forgo the position of Prime Minister. However, this concession may ultimately benefit Wilders. He will be able to act as both government and opposition, pushing the coalition as a member of parliament and through social media.
In the Netherlands, the firewall of conservatives and liberals against the far right is falling. This is a signal for all of Europe, especially with the European elections coming up in a month. The compromise with the far-right is unacceptable, responded Valérie Hayer, chair of the liberal Renew Europe group in the European Parliament. Wilders’ PVV stands in opposition to nearly all of Renew’s positions. The French politician announced that Renew will discuss its future course of action after the European elections.
EPP group and party leader Manfred Weber also faces a dilemma. The new NSC of Pieter Omtzigt and the Farmers’ Movement BBB would actually fit well into the EPP group. However, the coalition agreement with the Islam critic and EU opponent Wilders could jeopardize these plans. Although Wilders will not lead the coalition himself, he will have the right to nominate the Prime Minister. The latest suggestion is Ronald Plasterk, a Social Democrat who has shifted significantly to the right in recent years. The cancer researcher and head of a cancer therapy company served as a minister for the PvdA between 2007 and 2017 in various coalition governments.
Besides Wilders, other party leaders are also forgoing government positions. The future Prime Minister will need thick skin to balance the tensions between coalition partners. It is not for nothing that the negotiations took six months and almost collapsed several times. Wilders had to make concessions, scaling back the most radical positions in his party’s platform. Anything not in line with the constitution will be put on ice, he promised. This includes banning the Koran and the construction of mosques. There will also be no EU exit referendum or departure from the Euro.
The 26-page coalition agreement is titled “Hope, Courage and Pride”. Reaching an agreement on finances was difficult until the end. Wilders wants to spend money generously, while the right-liberal VVD and the right-conservative NSC insist on a balanced budget. The result is a compromise, but it is unclear if the calculations will add up. The coalition plans to cut income taxes and halve health care deductibles. Savings are planned in public service, development aid and transfers to Brussels.
At the same time, the two-percent target for defense spending in line with NATO guidelines will be enshrined in law. Remarkably, support for Ukraine will not be cut and the Dutch embassy in Israel will be moved from Tel Aviv to Jerusalem. The climate and nitrogen policies will be relaxed, with less funding for renewable energy and a return to a 130 km/h speed limit on highways. The policy to reduce livestock, which had led to farmer protests, will not continue.
The biggest potential for conflict with Brussels and European partners lies in asylum and migration policy. The coalition aims for a temporary opt-out from EU rules. The Netherlands had just agreed to the reform of asylum and migration policy, said an EU Commission representative. Exceptions are not foreseen. The coalition plans to suspend the processing of asylum applications, massively restrict family reunification, cut legal aid, and allow asylum seekers to appeal to only one court without further recourse.
The coalition also intends to halve labor migration and reduce the proportion of foreign students at universities, which has increased significantly since Brexit. How this aligns with free movement of people is one of many unanswered questions.
Tennet is considered a candidate for a takeover by the federal government. Would that be a step towards a Deutsche Netz AG – in other words, the nationalization of the entire German power transmission network?
I am sure you will understand that I cannot comment on ongoing negotiations. Tennet is already completely state-owned – just by the Dutch state – and the four German transmission network operators work closely together. I would not see any significant differences in the event of a possible sale to the federal government. The Dutch government has always ensured financing and supported us very well. The motivation of the German side for acquiring network operators has always been to guarantee long-term financing for network expansion. Germany faces over 300 billion in investments in the transmission network area alone, and about 500 billion if you include distribution networks.
The Netherlands apparently wants to sell because they do not want to invest on this scale in the German network. Who should finance the expansion?
As a network operator, we are essentially financed by debt and long-term access to the capital market is what concerns me more. At the beginning of the year, the Federal Network Agency further reduced the return on equity for all German network operators, while other European regulators have tended to increase equity returns. However, we compete in the capital market with many other infrastructure operators in Europe. If the equity ratio goes down, it will affect the rating and make debt capital correspondingly more expensive. I therefore believe that the Federal Network Agency will not achieve its goal of lowering network charges this way. On the contrary, if in doubt, network charges will tend to rise. This is where we need to act.
However, every network operator has been demanding a higher return on equity since regulation began. Now, such high investments are needed that Federal Minister for Economic Affairs Robert Habeck has suggested a time extension in the interest of electricity customers.
The basic idea is good and right. We are restructuring our entire energy system, and it would be pragmatic to spread the costs over several generations. However, it must be sensibly designed. Just as with the hydrogen core network, an amortization account for the electricity networks will not work. We have a significantly higher investment volume to manage – we are talking at least about a factor of 20. The incentives for investors must be different. With fully regulated operators, an amortization account will not be feasible. We need new solutions for liability issues and risk distribution.
Would a risk assumption by the European Investment Bank help, or higher subsidies from an expanded Connecting Europe Facility?
These can be useful supplements, especially when I think about projects for European interconnection. However, state funds and guarantees will not be sufficient for the task we have ahead of us. Most importantly, we need to secure and expand access to private capital through regulatory frameworks such as a deeper capital markets union and especially the return on equity.
You are under great pressure for network expansion. By the end of 2026, transport lines must meet European electricity trading requirements – otherwise, a split of the German electricity price zone looms. Recently, the Federal Network Agency reported successes with faster approvals. Will you achieve the EU goals?
The goal of reserving 70 percent of line capacities for European electricity trading from 2026 is still very challenging for network operators. We are on track to expand the transmission lines in both AC and DC areas faster. However, the major DC corridors – particularly SuedLink and SuedOstLink for us – will not be available until 2027 and 2028. These lines are the prerequisites to reduce bottlenecks in the German network. Despite all the challenges, we are currently managing to annually increase the minimum capacities for cross-border electricity trading as prescribed.
Will there be a split of the German bidding zone?
In the end, it is a political decision. The question remains how helpful a re-division of the bidding zones is at a certain point. With the completion of major DC corridors, the situation will fundamentally change repeatedly, and new price zones will not have an immediate steering effect. A bidding zone split is a long-term process in a very dynamic environment, so considerable political discussions will be necessary.
To accelerate approvals, laws have often been adjusted in recent years – most recently in Brussels through an emergency ordinance and the Renewable Energy Directive. Do you see any further possibilities?
The work of the federal government and the EU has helped us a lot in many areas. There are still minor adjustments where we see further potential. For the DC corridors, there are an enormous number of heavy transports for cables, and the approval procedures for these transports are incredibly lengthy, with each transport requiring individual approval. However, the lawmakers have tackled the major tasks for accelerated network expansion.
Really? Influential advisors are proposing a central European institution for network development. Bruegel has proposed an Independent Network System Operator and Enrico Letta suggested a Clean Energy Delivery Agency in his internal market report. Do we need genuine European network planning?
The European transmission network operators already work closely together in ENTSO-E. We jointly deliver the ten-year network development plan and have recently laid the foundation for hybrid connections of offshore wind farms to multiple EU states. I see no need to create new bureaucracy. Cross-border planning of transmission lines can be better regulated by the member states through regional coordination. A good example is the North Sea energy cooperation, in which the neighboring states cooperate. I do not see deficiencies in the energy internal market on the planning side, but rather in the market order.
Please explain that.
Taking the North Sea as an example, each country today has its own market model. The yield of a wind farm always depends on which country it is connected to. If an offshore grid is supposed to connect both wind farms and countries, it is unclear to wind farms which market rules they will be remunerated under and what securities they have. We need harmonization of market rules in Europe so that it does not matter where offshore wind farms are connected to the European grid. The same applies to interconnectors. So far, we have to laboriously align the regulations of the participating states. If the national electricity markets had a unified market framework, we could save a lot of time in building cross-border lines.
What needs to change for this?
First, we need a clear political commitment to connect the national electricity markets according to uniform rules. And we need the political will to fairly share costs and benefits without prioritizing national interests.
Network operators have a lot ahead of them in the North Sea. By 2050, neighboring countries want to connect 300 gigawatts of wind farms, with Tennet alone responsible for around 100 GW. Will offshore be the next bottleneck in network expansion?
For offshore connections, it is very important to have a steady demand so that manufacturers can plan accordingly. We have signed long-term contracts with producers to enable them to invest in additional production capacities early on. As Tennet, we have also responded early and developed a new technical standard that enables grid connections with two gigawatts – which means transporting twice as much power as before. However, the German exclusive economic zone is very limited in space. Many studies now show shading effects of wind farms in the North Sea because the BSH has significantly condensed the expansion in the 2023 area development plan due to political targets.
If the distances between wind farms are not large enough, a wind farm can slow down the wind for another farm behind it.
The densification of offshore wind farms off the German coast leads to shading and significantly reduced power yields. We see the need to reconsider whether this densification is sensible. Not for the systems already in the tender process, but for the future, it might be sensible if the BSH adjusts the area allocations again. European spatial planning authorities also need to coordinate with their neighbors. We see shading effects from Dutch on German wind farms or from Danish on German and vice versa. In planning offshore wind farms, there is still great potential for cost reduction through European cooperation.
