Reduced electricity demand could slash Germany’s transition investments by 2035 – report
Clean Energy Wire
Net electricity consumption in Germany may not rise as much in the coming years as assumed in current regulatory planning, according to a report by consultancy McKinsey. Electricity demand could rise by just 1 to 2 percent annually due to the weak economic situation, the slow ramp-up of e-mobility and heat pumps and delayed development of electrolysis capacities for green hydrogen, the report found. If the current trend continues, net electricity demand will be 530 terawatt-hours (TWh) per year in 2030, significantly below the estimated 670 TWh estimated in Germany’s Renewable Energy Act (EEG), but still far above the 2022 value of 480 TWh.
In 2035, electricity demand would also be 635 TWh, below the current grid development plan estimate of 774 to 1,002 TWh. With an expansion of the grid and renewable energy capacity based on actual demand, investments could be reduced by as much as 45 percent, from between 700 and 850 billion euros to between 450 and 550 billion euros by 2035, McKinsey found. This could limit the price of electricity from around 50 cents/kWh to 36-38 cents/kWh, the consultancy added.
"The decarbonisation of the German economy is coming - but there are currently many indications that it will be delayed," said Alexander Weiss, head of global energy consulting at McKinsey and co-author of the report. "Of course there will be additional demand in the areas of transport, hydrogen, industry and households. But according to our analyses, it will grow much more slowly than previously assumed."
Weiss stressed that "the expansion of renewables did not have to take place as quickly as currently planned in view of lower electricity demand, noting that the goal of increasing the renewables share to 80 percent by 2030 and climate protection targets were not in danger. The analysis modelled the electricity demand of industry, households, transport, district heating, hydrogen, data centres, commerce, trade and services and conducted a survey of more than 400 German companies.
