Germany Country Commercial Guide
Learn about the market conditions, opportunities, regulations, and business conditions in germany, prepared by at U.S. Embassies worldwide by Commerce Department, State Department and other U.S. agencies’ professionals
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Overview

The energy transition, in Germany known as the “Energiewende”, is the country’s planned transition from a clear dominance of hydrocarbon energy sources and nuclear to a low-carbon and nuclear-free economy based on the utilization of renewable sources.

Germany is on track regarding its target for 80% of supply to come from renewables by 2030. Germany was at 46% in 2022. However, the 2% reduction of greenhouse gas emission reduction across all industry sectors that occurred in 2022 is not sufficient to put the country on track to reaching its 2030 climate target, which is to reduce emissions by 55 percent compared to 1990. The energy crisis fueled by Russia’s war against Ukraine caused an increase in the use of dirtier coal electricity. Both the transportation and real estate sectors missed their 2022 greenhouse gas reduction targets. The country would have to triple the annual reduction from 2 percent in 2022 to 6 percent from 2023 onwards to attain their 2030 goal.

Investments in offshore wind, photovoltaics, grid expansion, and energy storage projects will be necessary. So will the implementation of a new, smart energy infrastructure that can balance the fluctuating supply of renewable sources. Furthermore, energy efficiency will play a key role. For decades, Germany has been the global pioneer in applying renewable energy and environmental technologies.

However, Germany has maintained a high degree of oil and natural gas to maintain electricity supply security with oil and gas being almost exclusively imported. These dependencies have generated two potential sources of instability. First, global price changes strongly affect German energy importers and end users. Second, market developments depend heavily on Germany’s relations with certain countries. The planned nuclear and coal phase-outs at the same time are set to increase the country’s reliance on natural gas, making it increasingly important to continue efforts to diversify gas supply options, including liquefied natural gas imports.

Although the share of electricity produced from renewable sources fed into the grid has been constantly increasing, there have been no remarkable incidents of power interruptions thus far. Commercial and private consumers can rely on a stable, continuous energy supply, for Germany has one of the lowest power interruption rates worldwide.

Energy consumption and generation

Energy consumption: Germany is the largest energy consumer in Europe followed by France and the U.K. As of 2022, primary energy consumption amounted to 11,769 Petajoules, with more than 75% coming from fossil sources, as well as 17.2% from renewables and 3.2% from nuclear energy.  Energy consumption is still noticeably lower than before the outbreak of COVID 19. Price developments in energy markets also caused a 3.5% reduction in consumption compared to 2021. The phase-out of nuclear energy and the continued promotion of renewable energies have caused changes in the 2022 energy mix. Mineral oil remained the most important source of energy with a share of 35.3%, followed by natural gas with 23.7%. Lignite accounted for 9.9% and hard coal for 9.8%, as the planned phase-out of coal was put on hold until April 2023 due to dislocations in the global energy market. Biomass, which accounts for more than 50% of renewable energy, recorded a 1% increase in consumption. The output of hydroelectric power stations decreased by 13%, suffering from a prolonged drought. Power generation from PV systems increased by 19% thanks to significantly sunnier weather, while wind power increased 10%.  

Energy production: Domestic energy generation was able to cover 16% of total consumption in 2023. The most important domestic energy source is renewable energy with a share of 42.3%, a decline of 4% compared to 2021. Lignite follows with 33.3%. Domestic natural gas production increased considerably and added 11.4%. The shares of other energy sources amount only to the low single digits.

Electricity generation: German electrical generation increased by .4% in 2022 and totaled to 506.8 TWh. A major part of electricity produced and fed into the grid in Germany in 2022 came from conventional energy sources and accounted for 51.7% of total electricity production. Lignite-fired power plants increased their net production to 105 TWh, to ease pricing pressure from natural gas shortages. Net electricity generation from nuclear power totaled 32.8 TWh, from gas-fired power plants around 51.9 TWh and from hard coal-fired power plants 56.3 TWh. The proportion of electricity produced from renewable energy sources and fed into the grid increased as a share of total consumption by 5.6% to 48.3%.  Electricity from wind power amounted to about 131.3 TWh and with a share of 25.9% wind was again the most important source of electricity. German photovoltaic systems generated about 55.3 TWh electricity, a 19% increase from 2021. Biomass generated 41.6 TWh and hydropower accounted for the vast majority of the remaining 14.2 TWh contributed by renewable sources. In total, renewable energy sources produced about 244.8 TWh in 2022, about 9% above 2021’s value.  

Energy costs: Energy costs increased dramatically in Germany in 2022 due to decreased supply from Russia. Energy prices for German households (electricity, gas, gasoline) have dropped markedly in early 2023 but remain at a higher level than in January 2022, before Russia’s invasion of Ukraine.  High energy prices are also a burden for the industry. The German government revealed plans to set aside around $4.4 billion each year to subsidize electricity prices for energy-intensive industries, in an attempt to shield businesses from high electricity prices that may force some companies to leave the country.

Energy imports

Natural Gas: The total volume of natural gas imported into Germany in 2022 was 1,449 TWh. The largest volumes came from Norway (33%) and Russia (22%).  Russia’s share was 52% in 2021. Overall, Germany’s natural gas imports were down 12% in 2022. While around 1.7 TWh were still being delivered daily from Russia through Nord Stream 1 until the middle of June, those figures dropped initially by 60%, then by 80% and ultimately fell to 0 TWh at the beginning of September. The lack of deliveries from Russia was partially compensated with additional imports from the Netherlands, Belgium, and Norway. Industrial gas consumption remains high at almost 500,000 GWh, which is 58% of total consumption. Although many industrial processes are to be converted to electricity or hydrogen in the long term, natural gas will continue to be relevant in various sectors.

Crude Oil: Germany’s crude oil imports rose 8.5% in 2022 as Europe’s biggest economy recovered from the COVID-19 pandemic and the bill for its purchases increased as oil prices surged. Russia remained Germany’s biggest supplier, but its share dropped to 25.4% in 2022 from 34.1% in 2021. Germany’s other big suppliers last year were the United States, Kazakhstan, Britain, Norway, and members of OPEC.

Liquified Natural Gas (LNG): In 2022, Germany imported around 1.32 million tons of LNG. Germany has sourced LNG from the U.S. and Gulf countries. U.S. LNG exporters boosted shipments to Germany and Europe by more than 137% in the first 11 months of 2022 from the same period in 2021, supplying more than half of Europe’s imported LNG. Qatar and the United States will remain Europe’s top LNG seller in 2023. U.S. LNG exporters have greater volumes of LNG available for spot market purchases than other major exporters, and as additional U.S. export capacity comes on line.

Energy policy

The Federal Ministry for Economic Affairs and Climate Action (BMWK) oversees the country’s energy policy and supervises the energy sector. The Federal Ministry for the Environment, Nature Conservation, Nuclear Safety and Consumer Protection (BMUV) is responsible for environmental protection, nature conservation and consumer protection.

Key to Germany’s energy policies and politics is the “Energiewende”, meaning “energy transition”. The most important tools for Germany to reach its targets on emission reduction are the expansion of renewable energies, the reduction of energy consumption, and the cessation of fossil fuels in all sectors of the economy. The policy also includes phasing out nuclear power, coal, and lignite. As of April 2023, Germany is no longer producing any electricity from nuclear power plants. The phase-out of coal and lignite will most likely be advanced to 2030.

The two pillars of the “Energiewende” are renewable energy sources and energy efficiency. Key legal provisions are the Renewable Energy Source Act (EEG), which regulates the renewable electricity sector, and the Renewable Energies Heat Act (EEWärmeG), which promotes the increase of heat generated from renewable energy in new buildings.  The share of wind or solar power should reach 80% by 2030. By then, Germany’s onshore wind energy capacity should double to up to 110 GW, offshore wind energy should reach 30 GW - arithmetically the capacity of 10 nuclear plants - and solar energy would more than triple to 200 GW.

To support the energy transition, Germany adopted its first Hydrogen Strategy in 2020, which was updated in July 2023. Hydrogen is considered key to the country’s clean energy future with the two main goals being the decarbonization of energy intensive industries like steel, cement, and chemicals to reduce emissions; and to provide backup energy generation capacity for the growing share of renewables.  

The updated Hydrogen Strategy also includes subsidies for the use, though not the production, of blue hydrogen. The focus will remain on green hydrogen produced from renewables.

The hydrogen strategy includes a two-stage plan of action. The first ‘ramp-up’ phase lays the foundation for a well-functioning domestic hydrogen market, which includes the development of the transport and distribution infrastructure for hydrogen and derived products. The second phase will strengthen this market ramp-up and provide a basis for European and international cooperation. The updated strategy is to accelerate the market ramp-up of hydrogen and its downstream products in the industry, for transportation, and aviation.

Energy security: Currently, Germany relies heavily on imports of fossil fuels as its domestic resources are largely depleted or their extraction is too costly. The war in the Ukraine, the nuclear phase-out, and Germany’s plans to phase out coal-fired power plants by 2030 have left the country with few options to bridge the gap.

Germany has a well-developed natural gas pipeline grid and is connected to terminals in neighboring countries, but until recently neither did it have its own port to receive LNG directly nor did it have its own regasification terminals for LNG, and imports entered through neighboring countries’ terminals, especially from Belgium and the Netherlands. The Russian invasion has led to a permanent shift in Germany’s energy policy and the German government has undertaken great effort at great cost and record speed to build up its LNG regasification capacities to make up for the discontinuation of Russian gas imports and diversify its energy sources to ensure energy security. The German government agreed to charter and operate five offshore FSRUs in the short run and three onshore LNG import terminals in the medium term.

Germany’s three terminals have a capacity to cover around 17% of Germany’s gas needs. These terminals will be ‘hydrogen-ready’ facilities and capable of switching from LNG imports to (liquid) hydrogen and hydrogen-based products (ammonia) in the future. In 2023, three more terminals with similarly large capacities are to be launched. In addition, the import volumes from Norway and the Netherlands will increase. The government assumes that Germany will be able to feed in more than 50 billion cubic meters of gas via the terminals as early as winter 2023. That is roughly the amount that Germany imported from Russia before the Ukraine war. Other fixed terminals with even larger capacities than the floating LNG terminals are planned for 2026.

Opportunities

Germany is Europe’s largest electricity market with an annual power generation of around 625 TWh and a capacity of around 200 GW. More than one thousand market participants are active in the fully liberalized market, with new market actors – who do not own power plants or supplier networks - successfully entering the domestic electricity market. The “Federal Network Agency” (Bundesnetzagentur) is the regulatory office for electricity, gas, telecommunications, post, and railway markets. The agency is also responsible for ensuring non-discriminatory third-party access to the power network.  

Energy infrastructure: Germany’s power grid ranks among the most reliable in the world, despite an increasing share of fluctuating renewable energy sources. The German energy transition is creating completely new challenges for the transport of electricity because the power generation structure is changing. Increasingly, electricity is being generated by wind and solar installations that are distributed throughout the country, some of them located a long way from the consumers. Furthermore, the electricity generated by wind turbines and new conventional power stations in the north of Germany must be transported to the major power consumption regions in the west and south.

Hence, major investments in the expansion of the transmission and distribution networks are planned as a result of renewable energy integration and the growing consolidation of Europe’s energy markets. New technologies in the energy grid sector – for example superconductors, high-temperature lines and local power transformers – are being tested in pilot projects. Information and communication-based technologies (ICT) provide important information for the safe operation of power grids. Alongside battery storage with solar systems, large-scale storage solutions are playing a growing role in the balancing energy market. Hydrogen also plays an important role thanks to the linking of the energy, heat and mobility sector.

Intelligent networks or “smart grids” allow fluctuating renewable energy power generation and consumption to be optimally managed by allowing a shift from “consumption-oriented generation” to “generation-optimized consumption.”

ICT will play a central role in connecting the different parts of the energy system. Intelligent ICT solutions will allow smart grids to efficiently manage power generation, consumption and storage in tandem with so-called “smart meters.”

Investment in High Voltage Lines and Grid Expansion: The total length of Germany’s transmission grid is around 35,000 kilometers. It transmits power with a maximum voltage of 220 kilovolts (kV) or 380 kV. Most of the power lines use alternating current, but the new transmission lines between northern and southern Germany, planned to be completed by 2025, will use the more efficient high-voltage direct current (HVDC) technology. Currently, just 0.4% of the German transmission grid is laid below ground. In response to public protests against overland powerlines and pylons, new legislation has given priority to underground cables, although this technology is more expensive to install and maintain. According to the Federal Network Agency, around 12,234 km of new power lines are needed to successfully implement the energy transition. Only about 1,739 km of the newly planned power grid has already been completed.

Some USD 117.5 billion are needed to expand and upgrade Germany’s electricity network by 2050 according to a study commissioned by electricity supplier E.ON. Some USD 34 billion of that amount would be needed by 2030. More solar and wind systems must be integrated into the network, and charging infrastructure for e-mobility, as well as heat pumps and electricity storage systems will need to be expanded. Without these investments, “follow-up costs” of USD 4.4 billion a year could be incurred because of overloaded networks that are not able to absorb renewable-generated electricity.

Transmission system operators (TSOs) keep control power available to maintain stable and reliable supply. Demand for control energy is created when the sum of power generated varies from the actual load. There are four grid operators in Germany: 50 Hertz Transmission, Amprion, TenneT TSO, and TransnetBW.

Energy Storage: The German energy storage market has experienced a massive boost in recent years. Germany is the global leader in energy storage technology for renewable energy systems. While the demand for energy storage is growing across Europe, Germany remains the European lead target market and the first choice for companies seeking to enter this fast-developing industry. The country stands out as a unique market, development platform and export hub. Energy storage systems will play a fundamental role in integrating renewable energy into the energy infrastructure and help maintain grid security by compensating for the enormous increase of fluctuating renewable energies. Germany’s geography limits the development of new pumped storage capacity. Hence, new storage technologies and smart grids are needed.

Around 1.7 million solar power plants with a total capacity of approximately 45 GWp have been installed in Germany over the past 25 years. Around 1,000,000 are residential rooftop installations with a capacity of smaller than 10 kWp. Every second newly installed residential PV-system is combined with an energy storage system to increase the amount of own-consumed PV electricity. Retrofit storage installations will also be a major driver for improving energy self-sufficiency in private households and commercial operations. Only 8% of rooftop PV systems in Germany are equipped with a battery today – by 2030 it could be well over 80%.

To integrate the large amounts of wind and solar energy safely into the existing grid, large battery systems will play an import role in Germany’s future energy infrastructure. These are well-suited to providing control power to stabilize grid frequency. At present, several demonstration and commercial projects have been put in operation or are being planned. (e.g., There are plans to build the country’s largest battery park in Eastern Germany’s historic lignite mining belt. The project involves building a USD $220 million facility to store for wind and solar energy that will gradually replace the sprawling coal pits of the Lusatia region.)

Hydrogen exports: There is great potential for hydrogen exports and hydrogen technology solutions to Germany. The government expects that around 90 to 110 TWh of hydrogen will be needed by 2030. And there is an even wider range of forecasts for 2050 for Germany, from 150 TWh to 550 TWh. According to these estimates, Germany’s hydrogen imports will account for around two-thirds of its consumption; it will mainly be imported by land via gas pipelines, and also by sea from other continents. Prior to importing hydrogen, Germany needs to invest in hydrogen pipelines which means building new pipelines and upgrading and converting natural gas pipelines as well as building hydrogen underground storage facilities.

The government plans to import green hydrogen from other EU member states, in particular those states that generate hydrogen from offshore wind in the North and Baltic Sea, or PV in southern Europe. Furthermore, Germany is in touch with potential international suppliers of hydrogen, including Canada, the UAE, Australia, and the United States.

In early 2023, Germany’s RWE and Norway’s Equinor have proposed a series of investments for the European hydrogen supply and its utilization in the power sector from 2030 onwards. The plan is to source blue and green hydrogen from Equinor in Norway and to transport it to Germany via a hydrogen pipeline, where RWE, Germany’s largest utility, will burn the fuel in hydrogen-ready, gas-fired power plants to produce electricity.

In January 2022, the European Commission has granted state aid approval to the German government to allow the funding of the hydrogen import program H2Global. Initially, H2Global aimed to promote the development of green hydrogen production plants in sunny non-EU countries. The H2Global Foundation will purchase green hydrogen abroad via auctions under long-term contracts. In May 2023, Germany has agreed to link its H2Global Foundation to the European Hydrogen Bank, opening the funding model to all EU member states to support international hydrogen imports. First deliveries of hydrogen are expected to arrive in Germany in 2024. 

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