Germany has committed more than 260 billion Euros ($275 billion) to deal with the immediate risks of an energy crisis stemming from Russia’s war in Ukraine, but an eventual solution will be more expensive if the country can achieve it at all, according to Bloomberg.
Bloomberg stated that the expected cost of predicting the future of the energy sector and developing ways to reduce the effects of future shocks and pressures in this regard is expected to reach more than $1 trillion by 2030.
The costs include investments in modernizing power grids, above all the new generation to manage the phase-out of nuclear and coal power plants, dealing with growing demand for electric vehicles and heating systems, and meeting climate commitments.
This transformation will require the installation of solar panels covering the equivalent of 43 football fields and 1,600 heat pumps every day.
It also needs 27 new onshore wind farms and four offshore wind farms to be built per week, according to a list provided by consultant Olaf Scholz during a recent visit to Volkswagen AG’s headquarters in Wolfsburg.
“This is a bold undertaking,” Vice Chancellor Robert Habeck, who oversees climate and energy policy, said earlier this month, “It’s perhaps the most daring project since Germany’s reconstruction”.
About 250 gigawatts of new capacity will need to be installed by 2030, when power demand is expected to be about a third higher than now, according to estimates by German grid regulator and think tank Agora Energywind.
To put the scale of the challenge in context, the amount of energy needed to be generated is sufficient to cover the current household demand of the entire European Union’s 448 million inhabitants.
The additions will be a mix of renewables and gas-fired plants, which may one day be converted to hydrogen.
According to Bloomberg, it will be a long way to get to this point.
The German federal government announced a few days ago that it would prepare tenders this year for gas stations, which represent about a tenth of that energy.
For renewed expansion, the construction of a single wind column can take up to 7 years to pass through Germany’s red tape.
The German chemical company plans to cut 2,600 jobs, as it faces pressures as a result of the energy crisis, in an indication of the urgent need for new energy projects.
The German chemical operations posted losses in the second half of last year and is now shutting down a number of energy-intensive plants, including two ammonia plants and related fertilizer facilities, cutting 700 jobs at its main site in Ludwigshafen.
At the heart of Germany’s energy dilemma lie political plans to phase out some energy sources, without a clear path to replacing them.
The country’s last 3 nuclear power plants will shut down by mid-April, and the country now aims to accelerate its coal disposal to 2030.
The challenge intensified after Russia cut gas flows, which were Germany’s main energy supplier before the war.
Excluding nuclear power and coal, Germany has quickly introduced more expensive LNG import terminals as it seeks to ensure it has the energy to power its industrial-heavy economy.
Meanwhile, electric cars, heat pumps and an electrolyzer for hydrogen production are set to boost demand by 33%, to about 750 TWh by 2030, according to government estimates.
While Scholz and Habeck have shown there is political will to push through the transition, they need help from the private sector, says Lisa Fisher, an energy systems expert at the E3G think tank.
Germany also needs to figure out how it will generate electricity when wind and sun are not available.
The German government’s plan so far has been to equip a fleet of new gas stations that can later be fueled with hydrogen, although it has struggled to find investors willing to take on such costly projects.
“Under the current framework conditions, sufficient investment cannot be expected,” Veronica Grimm, a member of the Economic Council who advises the federal government said.
She added that the lack of funding comes from the high level of uncertainty in energy markets and unclear regulations.
Berlin is trying to solve the problem with a sweeping overhaul of how energy is bought and sold, and a panel of experts who advise the government began deliberations a few days ago.
One option is to create so-called capacity markets, which already exist in the UK and pay producers for availability rather than just production.
The aim is to provide incentives to convert gas plants to hydrogen, even if they are unlikely to get much revenue outside of the dark winters, when renewable production is low.
Another challenge is ensuring that green electricity which is often generated in rural coastal areas in the north, reaches consumers and factories in the south.
The German network should double in size by 2030, according to Leonard Birnbaum, CEO of EON SE, which operates about 800,000 km of the German distribution network.
Despite all the challenges, Germany, Europe’s largest economy, still has some time to fix the imbalances and get the right conditions in place, but it needs to move.
“Germany can accomplish this, but there are hurdles that are not currently looked at in sufficient detail,” Lisa Fischer, an energy systems expert at the think tank said.