Q&A: What does the government’s “reality check” mean for Germany’s energy transition?
Content
- What is the German government’s “reality check” energy transition monitor?
- Why is the government doing it, and why now?
- Does Germany need a realignment of energy policy?
- What criticism has the report faced?
- Will the report lead to a slowdown of renewables expansion?
- Doesn’t Germany already monitor the energy transition?
Germany’s energy and climate community is eagerly awaiting the new government’s energy transition monitoring report, which is meant to subject the climate-friendly conversion of Europe's largest economy to a "reality check". Industry players, NGOs, activists, as well as the German media, have speculated intensely about what exactly the government will present at the end of summer, and how it could affect Germany’s plans for climate neutrality.
1. What is the German government’s “reality check” energy transition monitor?
The governing parties, the conservative Christian Democratic Union (CDU), the Christian Social Union (CSU) and the Social Democratic Party (SPD), said in their coalition agreement that they would carry out “a monitoring to review the expected electricity demand, the status of supply security, grid expansion, the expansion of renewable energy, digitalisation, and the ramp-up of hydrogen as a basis for further work.” It promised to do so “by the end of summer,” and added that energy policy would focus on affordability, cost efficiency and supply security. Economy minister Katherina Reiche said in her first speech as minister that the report would represent a “reality check” for the country’s energy policy.
Her ministry decided to commission researchers from the Institute of Energy Economics at the University of Cologne (EWI) and the consultancy BET. In a leaked description of what the ministry expects from the organisations, it said Germany must soon make decisions regarding the buildout of electricity and hydrogen capacity, as well as the power, gas, and district heating grids.
The leak said the monitoring report should consider the different energy transition areas mentioned in the coalition agreement (quoted above) to assess whether current government targets can be reached and at what cost. In a second step, the report should examine whether energy policy needs to be realigned, with a focus on cost-efficiency and supply security. It should adopt an approach that “combines transformation, economic competitiveness and social balance, and focuses on innovation to achieve the legal targets for security of supply and climate action in the most cost-efficient way possible.” To save time, the report should assess existing reports and scenarios for Germany’s energy future.
The government plans to have a final report from researchers by 31 August 2025, and will later present it to the public, likely in September.
2. Why is the government doing it, and why now?
The snap elections in early 2025 led to a change in Germany's government, bringing the conservative CDU/CSU alliance back into power, with chancellor Friedrich Merz at the helm. In a coalition with the Social Democrats (SPD), it promised significant policy changes from the previous government, in which the Green Party was responsible for energy policy and made the renewables rollout a priority. The monitoring report is meant to provide the basis for reforms going forward, which is why it had to be carried out quickly.
Minister Reiche said that one major goal is to “better align” renewable energy buildout and electricity grid expansion. In her view, renewables development has proceeded in a way that neglected cost-efficiency. For example, as crucial new power transmission lines are taking too long to build, electricity from wind turbines in Germany’s north is sometimes curtailed because it cannot be transmitted to where it is needed in southern states. At the same time, fossil fuel plants in the south are fired up at high cost to balance the grid.
“We must eliminate network bottlenecks before new capacity is added,” the minister said. She also argued that the high grid fees consumers pay to expand and maintain electricity networks are due to a “completely unrealistic, completely exaggerated renewable energy target.” The previous government in 2022 decided to align renewables expansion with the Paris Agreement goal of limiting global warming to 1.5°C. It reformed the Renewable Energy Act (EEG) and introduced the target of covering 80 percent of electricity consumption from renewables by 2030, setting ambitious capacity targets for wind and solar power by 2030 and 2040. If Germany were to use less electricity by 2030 than initially projected, renewables expansion could be slower than planned as well, and still allow the country to reach the 80-percent share.
Reiche also said that new small-scale solar PV installations no longer require state support, adding that electricity system costs must be “lowered significantly,” and that her government would focus on supply security. The minister wants to incentivise the construction of 20 gigawatts (GW) of new gas power plants as backup for intermittent renewables as the country phases coal out, and later introduce a capacity market for a wider range of backup plants.
3. Does Germany need a realignment of energy policy?
Like the rest of Europe and the world, Germany undoubtedly must modify the rules and regulations governing its energy system and adapt it to new realities. Energy industry representatives have also highlighted that different elements of Germany's energy transition progress at different speed. "We are quick to expand photovoltaics, but less so when it comes to wind energy and power grid expansion. And unfortunately, we are extremely slow in introducing smart meters; we have been lagging behind for years in the construction of backup power plants, said Stefan Kapferer, CEO of grid operator 50 Hertz.
While experts have differing views over how far reforms should go, the energy industry, scientists and researchers, and the government agree that renewables must continue to be expanded to eventually have a climate-neutral energy supply.
Guaranteed feed-in support payments for renewable energy projects have been at the heart of Germany's energy transition since they were introduced in 1990 and were emulated across the globe. Renewables are now the cheapest way to generate electricity, and the fastest growing power source in the country, sparking a debate about whether state support is still necessary. Renewable energy projects have been guaranteed state support for 20 years. As their share in the electricity mix grows (58% of total production in 2024), the country must still work out how to bring integration costs down while spurring further investments. The previous government started to prepare an electricity market reform, but only some elements have been introduced since then.
Germany’s electricity demand has declined in recent years due to efficiency gains, slower-than-expected electrification, and a decline in industrial production. A report published earlier this year by consultancy McKinsey said that Germany’s future electricity demand would likely remain below current estimates. It suggested that expanding grids and renewables based on newer forecasts that account for Germany’s weak economic growth, the slow ramp-up of e-mobility and heat pumps, and the delayed development of electrolysis capacities for green hydrogen could slash transition investment costs. Energy companies and grid operators have come to similar conclusions.
4. What criticisms has the report faced?
Reports about lower-than-expected electricity demand, the statements by minister Reiche, and the document outlining the expectations for the monitoring report, prompted critics to warn that the government might try to slow Germany’s renewables expansion, which could hinder the wider energy transition. They worry that the monitoring report could make recommendations which diverge from existing climate and energy targets.
A spokesperson from the economy ministry told Clean Energy Wire that targets remained. “Taking climate targets into account, consistent focus on cost efficiency and security of supply in all areas is the guiding principle behind monitoring and the resulting options for action,” the spokesperson said.
Climate NGO Germanwatch warned that the “reality check” relies on scenarios that in some cases fail to account for Germany’s climate targets. The group, which analysed the government’s tender of the monitoring report, criticised both the content and methodology. It warned the report could end up being less about identifying necessary improvements for the energy transition and more about “providing targeted and selective evidence for arguments in favour of significantly lowering the level of ambition and continuing to rely on fossil fuel-based energy supply structures for longer.”
Energy industry association BDEW said it agreed that it is important to harmonise renewables and grid expansion, and that the buildout of wind and solar PV parks should be “geared more towards yield and the costs of system integration.” However, it emphasised that there is “no doubt concerning the significant long-term need to expand renewable energies in Germany” and the electrification of sectors like transport and heating due to the country’s 2045 climate neutrality target. It said the monitor should therefore avoid fundamental changes to the agreed path for renewables expansion and instead focus on limited adjustments and prioritising certain projects.
A report by think tank Epico and consultancy Aurora Energy Research concluded that “even with lower growth in electricity demand, major efforts to expand renewable energy remain essential in the years ahead.”
Nina Scheer, energy policy spokesperson for the SPD parliamentary group, one of the governing coalition parties, also voiced criticism. The tender document for the monitoring showed “incompatibilities with the coalition agreement” wrote Scheer in a letter to the economy ministry.
Business-daily Handelsblatt assessed important energy transition research reports of the recent past and concluded that all assumed an accelerated renewables expansion.
Others have welcomed the report and its potential implications. Proponents of the government’s approach to curbing energy system costs include Leonhard Birnbaum, CEO of energy company E.ON. The head of the energy distribution and retail company criticised that an “unchecked growth” of renewables would ultimately lead to higher costs for adapting the grid. “We need a constant reality check instead of political targets,” Birnbaum argued. He urged the government to make “unpopular” cuts to renewables support and allow more flexibility through digitalisation to bring down costs eventually.
Grid operator 50Hertz's CEO Kapferer also said that plans for future network expansion should be revisited. "Do we really need the three additional DC connections that are planned? If so, what capacity should they have? By when should they be completed," he asked in an interview with WirtschaftsWoche.
5. Will the report lead to a slowdown of renewables expansion?
The potential impacts of the report remain uncertain.
Minister Reiche has not yet disclosed potential steps the government might take following the report’s conclusions but said it would guide future energy policy. The government said it remains committed to renewables expansion. However, the coalition agreement states that renewable power installations should eventually be able to finance themselves on the market. If state support were to be reduced or phased out – or uncertainty over future support persists – this could affect the pace of renewables development.
In addition, the leaked documents clearly mention that the report would make recommendations for a “reorientation of energy policy” if necessary.
An economy ministry spokesperson told Clean Energy Wire that the final monitoring report would “also be incorporated into existing monitoring processes, such as the System Development Strategy and Long-term Scenarios, which provide a consistent picture of the entire system.
Energy news service Tagesspiegel Background reported that the report’s results could influence a reform of the country’s Renewable Energy Act (EEG) in the second half of 2025. The law includes key targets such as reaching an 80-percent renewables share in electricity consumption by 2030, and specific capacity targets for technologies like wind power and solar PV.
The heads of government of Germany’s states urged the federal government to use the monitoring report to develop an “Energy Plan for Germany” – a long-term strategy for the move to a climate-neutral energy system.
Energy industry association BDEW insisted that the recommendations derived from the report must be “discussed in detail with the industry.”
6. Doesn’t Germany already monitor the energy transition?
Yes, it is easy to confuse the new monitoring report with the existing process that tracks energy transition progress. Since 2012, the government has regularly published an energy transition monitoring report. Each report provides a comprehensive overview of the energy transition’s current state, analysing key energy statistics. An independent commission of energy experts provides an additional opinion on each report and sometimes publishes separate assessments.
By contrast, the new report is by two specific institutes or consultancies, focusses on only a few selected elements of energy policy, and the guardrails set by the economy ministry are clearly geared towards cost-efficiency.
