Germany needs gas and oil phase-out strategies, coal exit on track for now – govt advisors
The German government should develop strategies to phase out oil and gas because consumption of the fossil fuels will “decline sharply” over the coming two decades as the country aims to become climate neutral by 2045, government advisors said. The reduction of fossil fuel use will have significant effects on grid infrastructure, energy supply security, and German companies in the sector, such as refineries, the independent expert commission charged with monitoring the country’s energy transition said in its 2025 report.
“The general lack of strategies is a significant problem,” said researcher and commission member Felix Matthes in a call with journalists. “The reduction of consumption has to be managed, while security of supply must be guaranteed at the same time.”
The slower-than-expected rollout of electric cars and heat pumps means Germany is set to miss crucial emissions reduction targets in the transport and heating sectors. That leads to “significant uncertainties” regarding oil and gas demand in the coming years, with projections diverging particularly sharply from around 2035. The advisors therefore call for “flexible, dynamic policy approaches,” and strategies to be reviewed and adjusted regularly.
Until now, the phase-out of oil has not been on the agenda for the government, researcher Matthes criticised. The expert commission said that a comprehensive concept for the transformation, decommissioning or repurposing of German refinery sites and oil supply infrastructures is “urgently necessary.”
Germany aims to become climate neutral by 2045 by phasing out fossil fuels, expanding renewable energy sources, improving energy efficiency, and storing remaining emissions underground. Germany’s energy transition has had broad public backing. However, support for individual measures is much lower, the expert commission said.
The researchers wrote that there is a need for political action in all areas of the energy transition to ensure that the transformation of the energy system to clean sources is as cost-effective and rapid as possible. The report uses a traffic light system to rate progress in the areas energy supply, supply security, energy security, prices and cost-efficiency, environmental sustainability, and societal aspects. All areas appear yellow, which means reaching targets is possible, but requires significant additional efforts.
The government said it would now assess the monitoring report. "For us, it is clear that for the energy transition to succeed, reliability, security of supply, affordability and cost-effectiveness of the energy system must be at the heart of Germany as an economic location," said Frank Wetzel, state secretary in the economy ministry.
Since the early 2010s, the government regularly published an energy transition monitoring report. The independent commission of energy experts provided an additional opinion on each report and sometimes published separate assessments. In 2024, the government decided to stop publishing its own report. Now, the independent expert commission presents the energy transition monitoring report annually by mid-December.
Increased calls for gas exit plan
The energy transition monitoring commission’s demand is the latest in a string of calls for a gas exit plan.
The fuel is currently used mostly in industry and to heat buildings, and only to a small extent to generate electricity. In the energy crisis, from 2021 to 2024, gas use declined almost 20 percent as households and industry reduced demand reacting to high prices and restricted supply. Preliminary data for 2025 will be released next week.
A gas exit strategy would primarily need to focus on distribution grids to help shield consumers from “massive cost burdens,” the experts said.
Researchers anticipate the net-zero transition will render more than 90 percent of the country’s gas distribution grid useless. However, local utilities – the operators of much of the gas supply system in cities and towns across Germany – are struggling to develop plans to decommission or repurpose their networks of gas pipelines. They have called for rules governing the phase out of gas grids or their conversion, as well as the question of who pays – issues which remain major obstacles for utilities to make plans. Local utilities today generate large amounts of their revenues from the gas system.
Without adequate regulation, the transition away from gas could also hit household consumers hard. As more and more households are expected to switch to other heating technologies over the next 20 years, the remaining gas customers could see their costs rise by a factor of ten, as fewer customers must foot the bill for maintaining distribution grids, researchers have warned.
This issue must be dealt with early, “because once the spiral of skyrocketing grid fees starts, we face disruptions very difficult to control,” said Matthes.
The economy ministry has started drafting regulation to address some of the issues.
Coal exit on track for now, but experts warn about future progress
Germany decided to phase out coal electricity by 2038 at the very latest, and introduced legislation to guarantee the step-by-step decommissioning of power plants.
The coal exit is advancing according to the country’s coal exit legislation, the report said. After a short uptick in coal electricity during the energy crisis in 2021 and 2022, production and plant capacities are declining again.
The advisors criticise a “complex, and partly inconsistent” system of reserve capacities, where power plants are not fully decommissioned so they can be fired up when needed. This is very costly and should be reformed, they said.
To guarantee the coal exit in the medium to long term, Germany must build sufficient electricity generation capacity that can quickly be brought online when renewables feed-in is low – so-called “controllable capacity.” The government plans to subsidise the construction of new gas-fired power plants, as well as facilities such as battery storages.
However, the plans have been delayed for years now, prompting the energy transition advisors to deliver a stark warning.
“Due to the slow pace of network and infrastructure expansion and the sluggish growth in controllable capacity – such as gas-fired power stations – it remains unclear to what extent the phase-out of coal can be achieved without massive accompanying measures – such as putting coal-fired power stations into highly priced reserves – while maintaining high standards of security of supply and system security.”
In addition, the experts said that factors like high carbon prices, especially from the late 2020s are set to increase the pressure on many coal operators to close plants even before the coal exit plan demands, as operating them becomes unprofitable. This could require regulators to put them into reserves as well, inflating the expensive fleet of backup for supply security.
