Germany is steadily improving its position in terms of the share of renewable energy in power supply, yet the improvement is achieved due to the decline in electricity consumption in the context of low industrial output. LSEG data reveal that fossil fuel electricity production declined by 19% in the first half of this year compared to the same period last year. However, renewable power generation only increased by 2.1%.
Fossil fuel generation has been reduced mainly due to a 6 percent reduction in total power generation capacity due to low electricity demand from weak industrial growth. If industrial activity increases, the power demand will also increase, which in turn will increase the use of natural gas-fired generation and thus erode the gains made in clean energy.
Today, wind energy is the largest source of electricity in Germany and has surpassed coal with 27%. 2% share in 2023. While the new capacity addition in the renewable power segment was on record high last year, out of all the renewable power sources, only solar was able to meet the government-set targets as wind power could not match up to expectations. Currently, Germany has set an objective of getting 53% of its electricity from renewables by 2023, but the new goal is to get 80% of its electricity from renewables by 2030.
High energy costs have greatly affected Germany’s manufacturing industries, particularly those that use a lot of energy, such as the chemicals and fertilizer industries. DB Research also adds that the decline in industrial production is not complete, as the Federation of German Industries anticipates a further 1.5% contraction in 2024.
Germany’s grid is becoming greener, and the emissions from the power sector are decreasing, but these are due to poor economic growth and industrialization. In the future, as the industry bounces back, there may be pressure to scale up fossil fuel-fired power generation as electricity demand grows, which threatens the advances made in renewables.
