Power and hydrogen grid expansion greatest shortcomings in German energy transition – commission

Achieving Germany’s energy transition and climate targets still requires a lot of political efforts to keep supply secure and affordable, the government-appointed expert commission tasked with monitoring the energy transition has said in its latest report. Implementing the targets by 2045, the year Germany is supposed to become greenhouse gas neutral, “cannot be taken for granted”, said the commission’s head, energy economist Andreas Löschel. While there is clear progress in key areas, especially regarding the expansion of renewable energy sources, other areas still require a lot of attention to stay on track, he said. “Further efforts are particularly needed for grid expansion for electricity and hydrogen.” The buildout of wind and solar power capacity has allowed the country to source more than half of the demand in its electricity system from renewables for the first time in 2023. Coupled with a progressive development in carbon pricing, this will ensure a market-based coal phase-out, the commission said. However, further requirements for establishing adequate alternatives include the construction of hydrogen-ready gas-fired power plants as back-up capacity, and a resolute buildout of grids for electricity, hydrogen and also for transporting CO2, according to the report.

Regarding the affordability of energy, the commission welcomed the government’s decision to reduce electricity prices for households by funding renewables expansion directly from the state budget, rather than through surcharges for power customers. But further reductions are necessary to ensure a swift adoption of electricity-based solutions that squeeze fossil energy sources out of the market, said commission member Anke Weidlich. “This should happen in the context of a CO2-based energy price reform in which the levies and surcharges on electricity are lowered and this is funded through a higher price on fossil energy sources,” she argued. This would lead to a faster adoption of low-carbon technologies such as heat pumps, electric vehicles, or cleaner industrial production procedures.

Philipp Nimmermann, state secretary in Germany’s economy ministry, said the independent commission’s report confirmed the government’s success in rolling out more renewable power capacity. “And this trend is being sustained,” Nimmermann said, adding that the share of renewable energy sources is on track to be well above 50 percent this year. He conceded that the report identified deficits in hydrogen infrastructure expansion as well as general shortcomings in decarbonising the transport and buildings sectors. “We will now examine this report,” the Green Party-affiliated state secretary said. “We must not slow our pace regarding the energy transition,” he added.