Last month, another record was broken. 62% of German electricity generation was based on renewable energy sources – more than ever before in the month of April. According to the think tank Agora Energiewende, onshore wind turbines alone provided one third more electricity than all German coal-fired power plants combined. Coal-fired generation fell to its lowest April level on record. Economy Minister Robert Habeck now sees „a whole new momentum in renewable expansion.“

Of course, monthly data is always just a snapshot influenced by numerous external factors. In this case, factors included warmer weather, higher wind levels, fewer outages in French nuclear power plants, or stagnating industrial electricity demand in the EU, reducing the need for German coal-fired power. But the trend is clear and not disputed by industry experts. „The legal framework in the electricity generation sector has improved significantly compared to previous years“, says the new „Energy Transition Progress Monitor“ issued by EY and the Federal Association of Energy and Water Management (BDEW).

This was already evident in the 2023 figures. For the first time, more renewable than conventional electricity was generated in Germany. More new wind turbines were approved as at any time in the past seven years. In the much needed expansion of the power grid, four times as many kilometres of lines were approved as in 2021. And the solar industry is booming, with a new installation record set. The German Institute for Economic Research (DIW Berlin) has concluded in a market analysis that "ensuring a supply of electricity with at least 80% renewable energy is feasible by 2030 without nuclear and coal-fired power plants.“

That is the goal set by the Renewable Energy Sources Act for 2030. 80% of electricity production should come from solar, wind, biomass, and hydropower. The plan envisages installed capacities of 215 gigawatts (GW) for photovoltaics, 115 GW for onshore wind, and 30 GW for offshore wind farms. Taking the 2023 figures, the installed solar modules would need to nearly triple, onshore capacity would need to almost double, and offshore capacity would need to almost quadruple. These are ambitious goals despite the newly ignited momentum.

But by 2035, according to policymakers, the German electricity system should be largely climate neutral – partly driven by decarbonisation in other sectors, mainly through increased electrification in transportation/e-mobility or buildings/heat pumps. The first problem is that transport and buildings are considered trouble spots in achieving climate targets. The share of renewable energy in the transport sector has hardly increased in the past 15 years. The goal of having 15 million pure electric cars on German roads by the end of the decade currently seems rather utopian. And in the building sector, despite recent improvements, the share of renewables is still below 20%. The new Heating Law is intended to pave the way here. However, grid and supply shortages, a shortage of skilled workers, and bureaucratic subsidy processes are still considered barriers.

A second problem is financing. The electricity markets also require a lot of money for the green transition to succeed as planned. According to calculations by EY and BDEW, investments of 721 billion euros will be needed by 2030 to completely restructure the complex system. Nearly half of this amount (353 billion euros) would need to flow into electricity generation – for further expansion of wind and solar parks, but also for the necessary hydrogen-capable backup power plants. The second big chunk of investment, 281 billion euros, is due for the expansion of the power grid, including both high-voltage and extra-high-voltage lines as well as distribution networks. In addition, there are the billions needed to build a hydrogen infrastructure, further expansion of district heating, and investments in storage.

Regional differences in the expansion of renewables could also become a third problem, as the energy transition progresses. For example, Bavaria is at the forefront of photovoltaic expansion but only added 26 megawatts (MW) of new wind capacity last year. In comparison, North Rhine-Westphalia added over 500 MW, Lower Saxony over 600 MW, and the small state of Schleswig-Holstein over 1,200 MW. Despite its green Prime Minister, the other major southern state, Baden-Württemberg, was not much better than Bavaria with 59 MW of new wind capacity last year. Habeck's ministry recently called for more progress, especially in these states, and warned of delays in achieving energy goals.

Problem four is the lack of backup capacities. One of the major unresolved issues of the energy transition is undoubtedly ensuring security of supply for times when the sun isn't shining and the wind isn't blowing. The compromise reached by the coalition government in its power plant strategy in early February calls for up to 10 gigawatts of new generation capacity by 2030. This involves „H2-ready gas-fired power plants“ – i.e., plants that should be fully hydrogen-powered by 2035 to 2040 at the latest. Cost estimate at current levels: 16 billion euros. Much more expensive types of power plants like hybrid or sprinter plants, which run on 100% hydrogen from the start, were not considered. In addition, there will be a capacity mechanism from 2028 onwards aimed at incentivising further investments in easily controllable power plants.

Nonetheless, the details are still pending, and the energy industry is pressing for decisions. If the 15 to 20 new power plants are to be completed by 2030, tenders would need to be issued in the coming months. However, the EU competition authority must first give its approval in the ongoing aid procedure. Habeck is optimistic that there won't be delays due to the European elections and that a decision will be made by the end of the current EU Commission's term. One thing is for sure: without the new backup capacities, the coal phase out won't happen.

Although nuclear energy has been repeatedly discussed politically even a year after the shutdown of the last German reactors, it is unlikely to play a role in the future. While the CDU has stated in its new basic programme that Germany cannot currently afford to do without the nuclear option, the DIW comes to the clear conclusion in its current electricity market analysis that building new nuclear power plants is „irrelevant for the energy transition in the coming decades.“ Nuclear energy is still not competitive. And globally, there is hardly a nuclear renaissance. Apart from China, the construction of new plants has practically ground to a halt. The output of existing power plants also decreased in 2023. As per the DIW, shutting down the last reactors was not a significant driver of German electricity prices.

The absence of nuclear power is unlikely to be a problem for the energy transition – unlike the absence of green hydrogen. Initially, this involves the establishment of completely new infrastructure, ranging from networks to electrolysis capacities. According to the federal government's goal, 10 GW should be in place by 2030, as 30 to 50% of the hydrogen required for the green transformation of industry and electricity production should come from Germany. Many industry experts consider this extremely ambitious.

Additionally, there is problem six – the shortage of skilled workers. Acccording to a study by the German Economic Institute (IW) at the end of 2023, there is currently a shortage of 216,000 skilled workers in professions relevant to the expansion of solar and wind energy. This includes IT specialists, building electricians, or craftsmen in the field of sanitary, heating, and air conditioning technology. The IW speaks of the „bottleneck of the energy transition“.

And of course, bureaucratic inertia must not be overlooked in this list. While many approval procedures have been simplified by the coalition government in the past two years, and the recently passed Solar Package I contains a whole bundle of further acceleration and bureaucracy reduction measures, it is clear to all involved that the pace must still increase.

So where does Germany stand currently with its energy transition? Views differ. Minister Habeck emphasises the new momentum, saying that "what's important now is to stay the course.“ The Federal Audit Office, however, has a different opinion. In March, the auditors issued a rather sobering interim conclusion in a special audit, and warned that security of supply is in jeopardy. The federal government, they demanded, must „immediately and purposefully change course.“