Energy transition: Rich slows down grid expansion - Germany losing connection

Germany is struggling in international comparison to electrify its industry, transportation, and heat generation. Fossil energy sources like gas and oil still dominate by a wide margin. According to Andreas Schierenbeck, CEO of Hitachi Energy, the world's leading power grid equipment supplier, this needs to change rapidly: "Electrification is the only viable way to permanently reduce dependence on oil and gas imports," Schierenbeck told the Handelsblatt.

Industrial nations like China, Japan, and Sweden, which also rely on oil and gas imports, have already converted 30 to 33 percent of their energy consumption to electricity, with a strong upward trend. In contrast, the share of fossil energy sources in Germany's energy consumption has hardly changed in ten years, remaining at 78 percent.

Only just over 20 percent of Germany's energy consumption is accounted for by electricity. The electrification of the transportation, building, and especially industrial sectors is making little progress in international comparison.

The CEO of Hitachi Energy assumes that Germany's electricity demand will increase significantly in the future. Schierenbeck cites a comprehensive system study commissioned by his company from the Fraunhofer ISE research institute and the consulting firms EY Parthenon and Fichtner. The study distinguishes between two scenarios for Germany: a "prosperity" scenario and a "stagnation" scenario.

According to this, electricity demand will increase from today's 487 terawatt-hours (TWh) to 1015 TWh in the prosperity scenario and to 895 TWh in the stagnation scenario by 2045. Electricity demand forecasts are politically sensitive, as they have a decisive impact on expansion targets for renewable energies and the need for grid expansion.

Hitachi Energy is the global largest power grid equipment supplier, according to industry analyses, ahead of Siemens Energy and GE Vernova. Hitachi Energy emerged from ABB's former power grid business, a company with Swiss-Swedish history, but is majority-owned by the Japanese conglomerate Hitachi.

In contrast to Hitachi Energy, Federal Minister of Economics Katherina Reiche (CDU) relies on rather cautious electricity demand forecasts. Reiche says that it can be assumed that electricity demand will develop at least until 2030 at the lower end of common forecasts. The expansion of renewable energies and grid infrastructure should be based on "realistic electricity demand scenarios".

The cost of grid expansion is one of the reasons for Reiche's caution. The expansion requires expenditures in the triple-digit billion range in the coming years. The costs are passed on to electricity consumers.

Cautious electricity demand forecasts are reflected in the grid development plan (NEP). The plan defines the expansion requirements for the power transmission grid. It is regularly updated. In its latest version, the number of planned lines that are intended to transport large quantities of electricity across the country using high-voltage direct current transmission technology (HVDC) has been reduced.

HVDC lines, often referred to as "electricity highways" in colloquial language, can transport electricity over long distances with low losses.

Schierenbeck is critical of cuts in grid expansion. "We haven't even built what we set out to do in Germany years ago. Now to say we need less is the wrong way." He complains: "We regulate renewables, grid connections take years, 160 gigawatts of solar parks are waiting for connection. Demand can't develop dynamically if we can't connect anything," he said. At the same time, the rapid development of data centers with their enormous energy demand is not adequately taken into account in current planning.

Schierenbeck is not alone in this attitude. Research institutions and consulting firms warn against pausing grid expansion across the board, as this could also slow down the expansion of renewable energies. This in turn could make it more difficult to phase out coal, oil, and gas. Even today, Germany's grid capacities are not sufficient to absorb the electricity generated from renewable sources. More efficient planning and accelerated approval procedures for new grids are therefore recommended.

Schierenbeck also considers this to be necessary: "The greatest acceleration potential for grid expansion lies in the approval process. The procedures usually take much longer than the implementation," he said. It is the task of politics to resolve this imbalance.

Whoever approves routes in advance and simplifies the process saves not only time but also money. "Fast implementation reduces the redispatch effort. We're talking about billions of euros here that can be saved in Germany alone every year," Schierenbeck said. The term redispatch refers to the interventions that grid operators must make to compensate for bottlenecks in the line network.

IEA chief criticizes Germany

That Germany is lagging behind in the electrification of its economy is also criticized by the International Energy Agency (IEA).