Germany’s utilities need €68 bln in new equity for grid upgrades – report
Clean Energy Wire
Germany’s roughly 900 energy suppliers will need an additional 68 billion euros in equity capital to upgrade their electricity and heating grids by 2035, a joint report by energy transition think tank Agora Energiewende, the Climate Neutrality Foundation, and finance think tank Dezernat Zukunft found. Otherwise, the required modernisations could push small municipal utilities in particular to their financial limits, the researchers warn.
“The energy and heating transition poses major challenges for some municipalities,” said Agora’s Germany director Julia Bläsius. “To ensure that energy suppliers with limited resources can continue to provide their customers with affordable and clean energy in the future, new financing models are needed – without placing an additional burden on municipal budgets or consumers.”
The additional equity capital of 68 billion euros is needed to allow companies to borrow much more money. Overall, the infrastructure for a climate-neutral energy supply will cost around 627 billion euros, according to the think tanks, who argue that equity capital is the decisive bottleneck for adequate financing.
Many utilities have weak balance sheets, restricting their ability to borrow. But their energy grids need to be modernised to cater for the rapid electrification of heating and transport, the phaseout of fossil fuel heating, and the integration of renewables.
More than 90 percent of utilities supplying around three quarters of German households will require additional equity capital, the report said. “Only a minority of private corporations and wealthy municipal utilities are in a position to finance the necessary investments without additional support.” The think tanks stress that switching to a climate-neutral energy infrastructure is also key to preparing companies for the foreseeable slump in gas revenues.
The researchers proposed credit guarantees, equity injections by shareholders, and “moderate” reductions in profit payouts to the companies’ owners, many of which are cash-strapped municipalities, to reduce the financing shortfall to around 12 billion euros. “The remaining gap could be closed by the federal government, regional states and private investors,” they said.
