Status report: Progress in the energy transition – but Reiche wants to slow down

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The Federal Ministry for Economic Affairs and Energy (BMWE) published the long-awaited "Monitoring Report" on the energy transition on Monday. The Institute of Energy Economics at the University of Cologne (EWI) and the Berlin-based consulting firm BET Consulting see progress in the expansion of renewable energies in many areas. At the same time, however, there are considerable challenges and missed targets that require further measures.

According to the report, the expansion of photovoltaics is on track to achieve the statutory targets for 2030 of 215 gigawatts (GW). There are also positive signals for onshore wind in terms of approvals. The authors also consider the target of 80 percent renewable energy in gross electricity consumption to be realistic.

"In the scenarios that assume that the climate targets will be achieved, a sharp increase in electricity demand is projected," they continue. However, this development is largely dependent on political decisions. The scenarios range from 600 to 700 TWh. Almost all the studies examined considered the electrification of buildings and transport to be the main option for reducing CO2 emissions.

Smart meters are moving into households

According to the report, the expansion of the onshore transmission grid is also making significant progress to create the necessary transport capacities. However, the measures newly confirmed in the 2037/2045 grid development plan have yet to be included in the Federal Requirements Plan Act. A lack of an amendment could lead to a "thread break" in the approvals. Difficulties with procurement and construction would also become more significant as the approval of many projects progresses.

The market launch of intelligent metering systems (smart meters) has gained momentum since 2023, the authors note. This is a crucial basis for leveraging efficiency and flexibility potential in grid operation. However, the "systemic benefits" need to be exploited even more. Sufficient certified smart meter gateways and production capacities are available in any case. Germany lagged here for a long time.

Hydrogen target barely achievable

The experts consider it problematic, for example, that too slow a development in the demand for electricity and hydrogen could jeopardize the achievement of climate targets. The expansion targets, particularly for offshore wind by 2030, are likely to be missed, which would cause grid-related delays and supply chain problems. According to estimates, the offshore target of 30 GW will not be reached until 2032.

Grid expansion is likely to become more expensive due to tight supply chains and price increases, the authors point out. However, digitalization and efficient operation offer the potential to reduce costs.

The hydrogen ramp-up is considered a central element of the energy transition, but is only getting off to a slow start. The supply costs for this "champagne of the energy transition" are significantly higher than the current willingness to pay, which is slowing down market demand. The 10 GW target for domestic hydrogen production by 2030 hardly seems achievable.

The future security of supply is doubtful, according to the report. An expansion of secured capacity, for example via gas-fired power plants, and an increase in flexibility could be advisable to maintain the supply standard. Many studies do not take sufficient account of cost efficiency or the micro- and macroeconomic framework conditions. A comprehensive assessment of energy policy measures is only possible through a holistic approach that takes all systemic dependencies into account.

Reiche wants to cut subsidies

Federal Economics Minister Katherina Reiche (CDU) sees the energy transition "at a crossroads". She is calling for a "more honest assessment of demand and planning realism". Instead of relying on subsidies and rigid guidelines, a capacity market open to all technologies should guarantee security of supply and maintain the unity of the energy markets.

Specifically, Reiche plans to abolish the fixed feed-in tariff for new solar installations. According to the BMWE, the expansion of green electricity plants and storage facilities should be "better spatially controlled".

The minister describes the simultaneous and synchronous expansion of grids, renewables and decentralized flexibility as a key challenge. The aim is to promote the systems in line with the market and the system and thus increase the efficiency of the overall system. Reiche advocates a pragmatic ramp-up of new technologies. This includes accelerating digitalization and promoting research and innovation.

The hydrogen ramp-up and the establishment of controversial processes for capturing and storing CO₂ are particularly important. Politicians must avoid misinvestment and overregulation in order to ensure the affordability and economic viability of the energy transition for everyone.

Sharp headwind for Reiche

Reiche's conclusions have been met with much criticism. Julia Bläsius, Director of the Agora Energiewende think tank, emphasized that how quickly climate-neutral industrial production, electrolyzers, heat pumps, or electric cars could be established would also depend largely on politics. Bläsius believes that slowing down the expansion of renewables based on a lower electricity consumption forecast is short-sighted and costly. Such an approach would also send the wrong signal to the domestic economy.

"With the conclusions that Ms. Reiche is drawing from the energy transition monitoring, she is burdening our energy supply with a heavy mortgage," criticizes Sascha Müller-Kraenner, Federal Managing Director of Deutsche Umwelthilfe (DUH). The minister "continues to swear by the abbreviated proposals of the gas lobby". In fact, there is a threat of a brake on the expansion of renewables. The solar industry is also warning of funding cuts.

(nie)