Germany needs stronger focus on decentralised energy solutions for cost-efficient transition - analysis

A consistent focus on decentralised renewable energy sources and storage solutions can lead to billions of euros in savings and additional value creation for Germany over the next two decades, consultancy Roland Berger has found in an analysis commissioned by energy company Enpal.

The analysis was presented by the “New Energy Alliance,” a group of 20 companies including Enpal, 1Komma5° and Octopus Energy as well as engineering company Bosch, real estate company Vonovia, metering company Techem, automotive industry company Volkswagen Group Charging (Elli) and others. Decentralised solutions describe an energy ecosystem that generates and stores energy close to the point of consumption, including PV systems, battery storage solutions, heat pumps and e-mobility based on smart and bidirectional charging. The analysis found that fast and target-oriented measures to better integrate these solutions are necessary to tap into a possible added value of 255 billion euros by 2045.

By contrast, the major focus on new gas-fired power plants as backup for renewables chosen by economy minister Katherina Reiche would not be justified. Even if gas plants have a purpose in a cost-efficient system, putting too much weight on the fossil fuel plants that run on imported natural gas comes with geopolitical risks by keeping Germany dependent on importers, the analysis concluded. Digitally connected systems based on solar and wind power, on the other hand, can stabilise the power system and strengthen the German economy as a high-tech location in markets of the future. An “interplay” between centralised and decentralised would offer the most efficient approach. 

Energy company 1Komma5° commented that, besides renewable power and “needs-based” backup capacity, decentralised options should be “consistently developed as a third main pillar of Germany’s energy mix.” Individual households and small companies had the biggest potential for becoming more cost-efficient in their energy use, the company said, arguing that a more flexible demand and supply pattern could save the average household up to 1,200 euros per year.

A recent monitoring report of the German energy transition commissioned by economy minister Katherina Reiche found that the transformation generally is advancing on the right course. The monitoring labelled as a “reality check” by the minister underlined that the expansion of renewable energy sources and flexibility solutions such as storage are needed both to reach the country’s climate targets and keep the economy competitive.

However, Reiche argued that a slower expansion of wind and solar power that is brought down to the level of lagging grid expansion could be necessary to save costs. She also advocated for the construction of up to 20 gigawatts (GW) of new gas-fired power plants as a backup for renewable power, an approach that is currently being reviewed by the European Commission with respect to state aid rules. Reiche’s predecessor in the economy ministry, Robert Habeck from the Green Party, had planned with only 12.5 GW of new gas plants.