The German Energiewende

The German energy transition, known in Germany as the Energiewende, is a long-term energy and climate strategy to move Germany towards a climate-neutral energy system by 2045. It is a large-scale economic and ecological project motivated by scientific insights and ethical considerations with far-reaching economic and societal impacts.

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Over the last 25 years, the German electricity mix has undergone significant diversification. Today, renewable energy – foremost wind and photovoltaic – has become the backbone of the German Energiewende and is the cheapest form of electricity generation.

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Germany began developing renewables when they were still relatively expensive, creating costs that were borne by the consumers over the past decade through a levy on electricity. However, renewables are no longer a major cost driver. Under normal circumstances, they can reduce the bills of end consumers by minimising exposure to highly volatile fossil fuel prices.

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Over the past five decades, Germany’s energy supply has shifted from a dominance of fossil fuels and nuclear power to a more diversified system based on renewables.

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With an energy system based on renewables, Germany would not need to import coal or nuclear electricity. The current energy crisis is due to extreme volatility on the global fossil energy market, and an energy system 100% based on renewables will protect the market from such shocks in the future. Until the crisis, Germany was a net power exporter since 2003 and did not need to import nuclear or coal electricity to compensate for relying on renewables. In fact, renewable energy sources had more than compensated for the closure of fossil and nuclear power plants.

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The German Energiewende is deeply rooted in German history and society. It emerged from public opposition to nuclear power in the 1980s and 1990s and intensified in the 2000s due to growing concerns about climate change. Opinion polls have shown that German citizens are generally positive about the energy transition. The majority are willing to accept measures that make an effective contribution to reducing greenhouse gas emissions.

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The development of renewable energy alone is not sufficient for rapidly reducing greenhouse gas emissions. Additional measures are required to actively phase down coal-fired power generation. To meet its climate targets, Germany adopted legislation in 2020 with the objective to phase out coal power by 2038. The current government has vowed to end the fossil fuel era and phase out coal ideally by 2030.

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Under the European Emissions Trading System (EU ETS), Germany’s energy-intensive industry and energy-sector installations are charged for their CO2 emissions. In 2021, Germany also began to tax greenhouse gas emissions in the transport and building sectors, which lie outside the scope of the EU ETS.

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Germany has successfully decoupled economic growth from energy consumption. The production of low-carbon technologies and the promotion of energy efficiency have stimulated innovation, created employment opportunities, and increased local income. Overall, the energy transition continues to have a net positive effect on the German economy.

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The goal of reaching climate neutrality by 2045 is ambitious, but achievable. It requires decisive policy action and a comprehensive mix of instruments and measures. There is no “one size fits all” solution. However, a successful energy transition will not only help to limit climate change and avoid its worst impacts but also to ensure long-term energy security.

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