Lower renewables, hydrogen buildout could greatly reduce Germany's energy transition costs - energy company

Germany could achieve climate neutrality by 2045 at a much lower cost through a combination of energy efficiency measures and a slower expansion of power generation and transmission capacity than currently planned, an analysis commissioned by energy company EnBW found. The analysis conducted by energy consultancy Auroa ER tallied the potential savings at about 700 billion euros over the next 20 years if the recommendations made in the report are swiftly implemented, with the initial “systemic costs” gauged at about three trillion euros.

“The expansion of renewable energy sources, disposable capacity, and grids must continue at a fast pace to achieve Germany’s climate targets,” the analysis found. If the right steps are taken now, costs can be reduced and acceptance increased, which would come with positive knock-on effects on economic output, Auroa ER found.

For the savings to materialise, the country would have to “technically optimise” its energy transition schedule. By adapting the expansion of renewables to actual demand and initially using blue hydrogen made with fossil fuels as an alternative to green hydrogen made with renewables, costs could already be reduced by about 300 billion euros.

Several analyses released in the past years have found that the German electricity demand could grow slower than expected in the next years, meaning that existing plans could be oversized. But the issue of the country's future power consumption remains contentious. In reaction to the Aurora analysis, renewable energy association BEE said the paper was based on the wrong assumption that the electrification of heating and transport won't be implemented rapidly, and that the country's economic weakness will drag on for years. The lobby group added that the researchers also "massively" underestimated domestic green hydrogen production potential and additional electricity demand from data centres.

Cutting offshore wind expansion, for example, could save a lot of money, as the current expansion goal of 70 gigawatts (GW) would lead to an uneconomic grid buildout, the Aurora analysts argued. They instead recommended an expansion target of 55 GW or even less, depending on demand. Likewise, Aurora ER argues that solar PV expansion should be reduced by about 145 GW from its current 400 GW and from 50 GW to 10 GW for electrolysers that produce green hydrogen. By building up a disposable gas-fired power plant capacity of 55 GW instead of 35 GW that could later by converted to run on hydrogen, further savings could be made, as that would require fewer renewables, grids, and storage investments. This was the case if they are operated with imported blue hydrogen until green hydrogen is cheaply available and fewer large-scale battery storage units are built, with the authors recommending to halve plans to only 70 GW capacity.

Frederik Beelitz, head of advisory Central Europe at Aurora ER, said the analyses showed that there are “significant” cost reductions to be made in the German energy transition. “Especially with a view to the adapted electricity demand, we show how important it is to draft new plans.” The EnBW analysis assumes a demand of 715 terawatt hours (TWh) in 2045, up from about 465 TWh in 2024.