Germany’s Power Sector Transition: Rising Renewable Energy With 143 GW Capacity And Increased Reliance On Imports Amid Falling Demand

Germany’s power sector is undergoing a major transformation as it navigates a complex landscape of falling demand and shifting energy sources. The country, long a leader in renewable energy, now faces challenges due to its heavy reliance on power imports and the phase-out of coal and nuclear energy.

Demand for electricity in Germany continues to decline despite a stabilization in prices. The country has retired significant amounts of coal and nuclear power capacity, making it increasingly dependent on electricity imports from neighboring nations. Despite these challenges, there is a positive outlook for Germany’s renewable energy sector. Projections from Rystad Energy suggest that Germany will exceed its policy goal of generating 80% of its electricity from renewable sources by 2030. This progress is largely driven by the rapid expansion of solar and wind energy capacities.

Germany has seen substantial growth in renewable energy installations, reaching 143 gigawatts (GW) of alternating current (GWac) by the end of 2023. The country leads Europe in renewable energy capacity, and new records for solar and wind installations were set last year. This trend is expected to continue, with more significant achievements anticipated in 2024. Between 2024 and 2028, Germany plans to auction over 120 GWac of new renewable energy capacity, including solar photovoltaic (PV) and offshore and onshore wind projects. The most significant increase will come from onshore wind, with 50 GWac planned for auction in the next five years. While these targets are ambitious and some may not be fully realized, recent progress indicates a promising future.

By 2030, Germany is projected to have nearly 300 GWac of renewable energy capacity, more than doubling its total from the beginning of 2024. This growth reflects Germany’s ongoing efforts to decarbonize its power sector and enhance its position as a leader in renewable energy. Fabian Ronningen, Vice President of Renewables & Power Research at Rystad Energy, notes that despite some short-term challenges, the long-term prospects for Germany’s power sector look bright. If current goals and strategies are maintained, Germany is expected to continue leading Europe in renewable energy and reduce its dependence on imports.

At the start of 2024, many experts anticipated a rebound in power demand in Germany and across Europe after two years of decline. However, with nearly two-thirds of the year completed, it appears unlikely that there will be a significant recovery in demand. Net on-grid power demand in Germany has dropped by about 0.7% this year and is now 8.1% below levels from 2021. Without a sudden increase in demand, Germany may end 2024 with another year of reduced or stable power demand.

The decrease in power demand has been accompanied by a more significant drop in supply. Power generation has fallen sharply, with coal and nuclear energy seeing the most considerable declines. This year marks the first time that nuclear energy has been entirely phased out of Germany’s power mix. The reduction in coal power has been substantial, with gross coal power generation expected to total 107 terawatt-hours (TWh) this year, down from 163 TWh in 2015. Although this decrease is environmentally positive, it has led to greater reliance on power imports, contributing to higher electricity prices in Germany compared to its neighbors.

German power prices, though still lower than those in Italy, remain elevated due to supply issues. In the past, Germany benefited from a robust domestic supply, keeping prices lower than those in France. However, with France maintaining stable supply and low prices through its nuclear power generation, Germany’s current reliance on imports has led to higher electricity costs. Despite impressive growth in renewable energy, it is clear that the transition has not yet fully compensated for the loss of nuclear and coal power in Germany’s energy mix.