Fulfilling Germany's green ambitions will require hundreds of billions of euros by the end of the decade

Germany has set highly ambitious targets for the development of renewable energy sources, one of the main tools for decarbonising the economy. According to an analysis by the BDEW association and EY, achieving them will cost the country 721 billion euros by the end of the decade alone. Overall, the billion-euro investments should help the country reach an 80% share of renewable energy sources (RES) in electricity consumption and a target of cutting emissions by 65%.

Almost half of the several-hundred-billion-euro sum, 353 billion euros, is expected to go towards increasing installed RES capacity. The analysis says that strengthening the transmission and distribution grids will also require significant investment, reaching 281 billion euros by the end of the decade.

A much smaller amount, 32 billion euros, is expected to go to district heating networks. Expanding capacity to produce green gases is projected to cost 23 billion euros, while energy storage will require 17 billion and the hydrogen backbone network 15 billion.

"Billions of euros will be invested in Germany's energy sector in the coming years—investments that can generate significant growth and create value at the regional level," said Metin Fidan, an EY partner and head of green transformation and mining in Western Europe.

According to the authors, the investments should spur the creation of added value through the manufacture of components such as wind turbines, solar panels and electrolysers. They therefore estimate annual gross value added at 52 billion euros.

If Germany is to achieve this level of growth, it will need greater investment. The analysis says gross value added reached 28 billion euros last year, roughly half its potential. In electricity generation, or the development of renewable energy sources, added value amounted to 16.4 billion euros last year, out of a potential 27 billion. For the development of the transmission and distribution grids, the analysis reports that 9.7 billion euros of added value was created last year, out of a potential 11.6 billion.

According to Kerstin Andreae, chair of the BDEW executive board, annual gross value added remains far below its full potential. Gross value added rose last year from 8.6 billion euros in 2022, but there is still considerable room for growth.

"To fully realise this potential, further investment is needed in renewable energy generation and grid expansion," Andreae said.