IEA recommends Germany optimise electricity system to reduce costs

A new Energy Policy Review from the International Energy Agency (IEA) suggests that enhancing the efficiency and resilience of Germany’s electricity network is pivotal to ensuring a secure and affordable energy transition.

The IEA advocates for the country to refine its energy system to cut costs and hasten emissions reductions across different sectors. Germany’s Energiewende policy is driving its shift towards renewable energy.

The country's transition to a power system based predominantly on renewables is seen as an opportunity to boost energy security and improve long-term economic competitiveness.

However, there is still significant work to be done to achieve its climate neutrality target by 2045, including expanding the electricity infrastructure, reducing energy costs, and addressing emissions in sectors such as transport, buildings, and industry.

The IEA report acknowledges Germany’s progress in phasing out nuclear energy and decreasing its reliance on coal-fired power generation. Simultaneously, the country has made considerable strides in increasing its wind and solar energy capacity.

Despite these advancements, it faces ongoing challenges, particularly due to the energy crisis resulting from Russia’s reduction in gas supplies to the EU.

Germany is experiencing issues with regional disparities in electricity supply and rising electricity costs, which threaten affordability and industrial competitiveness.

According to the report, overcoming these challenges will depend on continued growth in renewable energy generation, expansion of the power grid, and enhancing flexibility within the electricity system.

Additionally, efforts to reduce consumer energy prices will be vital for success.

The transport sector remains the largest contributor to emissions in Germany, and the IEA report calls for a more focused approach to address this.

This includes promoting the adoption of electric vehicles, biofuels, and improvements in public transport infrastructure.

The report also stresses that consumer incentives will be crucial to encouraging the widespread adoption of low-emission transport options to meet Germany’s climate goals.

The report highlights the need for efforts to improve the energy efficiency of Germany’s older building stock to support its clean energy transition.

The country has already taken a significant step by passing the Buildings Energy Act and the Heat Planning Act, which together provide a framework to reduce emissions from space heating through district heating and heat pump technologies.

Ensuring effective communication with households will be essential to achieving the desired outcomes.