Germany is pushing ahead with the transformation of its energy system, aiming to source almost all of its electricity from renewable sources by 2035 and achieve complete climate neutrality by 2045. The political course focuses primarily on wind and solar energy, but criticism from the economic and industrial sectors is growing significantly. The trigger is the accelerated expansion coupled with rising system costs, while the key risk factor lies in the lack of security of supply during periods of low wind and solar power generation. The consequences affect not only electricity prices but also, increasingly, the competitiveness of energy-intensive industries such as chemicals, steel, and aluminum, which are already considering relocating their production facilities.
Extreme Target Exacerbates Costs and Location Disadvantages
The political goal of a near-complete supply of renewable energy leads to sharply rising marginal costs as the system approaches 100 percent. While the initial expansion phases are relatively efficient, the costs for the final stages increase disproportionately. This effect puts a strain on companies that rely on stable and affordable energy.
Therefore, industrial companies are increasingly under pressure, as electricity prices remain a key location factor. The chemical and steel industries, in particular, require large amounts of energy continuously, while fluctuating feed-in from wind and solar power creates additional risks. Companies are already reacting by holding back on investments or considering relocating production abroad.
Studies contradict political expansion logic
Energy economic analyses show that maximizing the expansion of renewable energies is not automatically economically sound. Economist Lion Hirth concludes that significantly lower shares would be more efficient. For onshore wind energy, for example, he sees an optimal share of around 20 percent.
These figures stand in stark contrast to political targets. While policymakers are aiming for near-complete decarbonization in the electricity sector, studies show rising system costs and declining efficiency. This creates a structural imbalance that threatens the industrial base in the long term.
Subsidies further distort expansion
Good locations for wind power are limited, while expansion is increasingly shifting to less suitable regions. There, the utilization of the plants is declining significantly, but government subsidies ensure their profitability. These interventions distort the market and increase the overall costs of the system.
At the same time, guaranteed feed-in tariffs are rising considerably, while inefficient plants are artificially kept profitable. According to the analysis, tariffs in weaker regions are around 55 percent higher than usual. These additional costs are ultimately borne by consumers and businesses, further exacerbating the competitive disadvantage.
Energy-Intensive Industries Plan Relocation
The combination of high electricity prices and unreliable supply is hitting energy-intensive industries particularly hard. Companies in the chemical, steel, and aluminum sectors require reliable baseload power, while volatile feed-in increases production risk. Therefore, many corporations are examining alternative locations with more favorable energy conditions.
While other countries rely on stable energy mixes, Germany is losing its appeal as an industrial location. Initial investments are already flowing to regions with lower energy prices, such as North America or Asia. This trend could accelerate if costs continue to rise and political objectives remain unchanged.
Security of Supply Remains an Unresolved Core Problem
An electricity system heavily dependent on weather conditions brings with it structural uncertainties. Periods of low wind and solar power generation can simultaneously cause large portions of production to fail, while storage technologies are not yet available on the required scale. Therefore, enormous reserve capacities would need to be built.
Furthermore, the demands on grids and infrastructure are increasing significantly, while electricity must be transported over long distances. These investments are driving costs even higher. The result is a system that is becoming both more expensive and more complex, while security of supply is not fully guaranteed.
Realistic energy policy requires a course correction
Economists are therefore calling for a technology-neutral approach that gives greater consideration to security of supply and economic efficiency. A balanced energy mix could better compensate for fluctuations and simultaneously limit costs. This perspective is gaining importance in light of the increasing risks of energy relocation.
While political goals continue to focus on maximizing the share of renewable energies, economic analyses reveal clear limitations to this strategy. Without adjustments, there is a risk of the gradual loss of key industries. The energy transition would then not only be expensive, but also have significant structural consequences for Germany as a business location. (KOB)