Germany’s Energy Transition: A €1 Trillion+ Investment Towards a Sustainable Future but With Uncertain Challenges Ahead

A recent study by EY and BDEW reveals that Germany’s energy transition will require a massive investment of 1,240 billion euros by 2035. Despite the significant cost, the transition is also expected to generate growth and momentum towards a more sustainable future.

The aim is to phase out coal-fired power generation by 2038 and shut down nuclear power plants by April 2023, as part of a political goal to accelerate the coal phase-out. This necessitates investments in expanding renewable energy sources and transmission networks.

According to the “Energy Transition Progress Monitor,” an estimated 1,214 billion euros in investments will be needed by 2035, with 721 billion euros required by 2030. These investments are crucial for achieving the set energy transition goals, including increasing the share of renewable energies in electricity generation to 80% by 2030.

The study highlights that most of these investments will go towards expanding electricity generation from renewable sources, with around 569 billion euros needed by 2035. In addition, investments in transmission and distribution networks for electricity and gas are projected to reach 473 billion euros, emphasizing the need for infrastructure development to support the energy transition.

However, despite progress made in expanding renewable energy sources such as photovoltaics and wind energy in 2023, challenges remain. These include accelerating wind energy expansion, overcoming setbacks in the heat transition and addressing skill shortages in the workforce. With pressure mounting to meet the set goals for 2035, attracting private capital for energy transition projects and creating incentives for investments will be critical challenges ahead.

In summary, while Germany’s energy transition requires a massive investment of €1 trillion+ by 2035, it is expected to generate economic benefits such as growth and job creation through increased investment in renewable energies and infrastructure development. However, there are still challenges that need to be addressed before reaching full realization of this potential.