Billions for the expansion of the electricity grid

06.12.2024

A recent study puts the cost of expanding the electricity grid in Germany at 651 billion euros by 2045.

A new study on the energy transition with new billion-euro figures: The Institute for Macroeconomics and Business Cycle Research (IMK) of the Hans Böckler Foundation, which is close to the trade unions, has presented its cost estimate for the expansion of Germany's energy infrastructure. Investments of 651 billion euros would be required by 2045: 328 billion euros for upgrading the transmission grids and 323 billion euros for the distribution grids.

The study states that the decarbonization of the German economy requires a massive expansion of the transmission infrastructure in order to cope with the increasing demand for electricity due to the electrification of transport, industry and buildings as well as the integration of renewable energies.

According to the authors, electricity consumption will increase from 533 billion kWh per year at the beginning of the 2020s to between 1,000 and 1,300 billion kWh in 2045. They are referring to the current grid development plan of the transmission system operators.

Annual investment in the electricity grid would have to increase from the current level of around 15 billion euros to around 34 billion euros, an increase of 127 percent. This growth is necessary to successfully implement the energy transition.

This requires extensive grid expansion, especially the strengthening of the north-south axes in order to transport the wind power generated in the north to the industrial centers in the south. At the same time, south-north connections are becoming increasingly important due to the expansion of photovoltaics. However, the study also sees potential to make better use of the existing infrastructure.

The costs for redispatch measures have recently risen sharply and are burdening consumers through higher grid fees. In 2023, the costs had risen to more than 3 billion euros, compared to 1.3 billion euros in 2019. Accelerated expansion is therefore necessary to drive forward the energy transition and keep energy affordable.

However, risks such as rising commodity prices, bottlenecks in critical components and long approval procedures could delay and increase the cost of expansion. "On the side of the distribution grid operators, the uncertainties regarding the estimates are somewhat higher," the study states.

Renewable umbrella organization: Grid expansion is just getting underway

Simone Peter, President of the German Renewable Energy Federation (BEE), warns in a press release on the study against using the high costs as an argument against grid expansion. "Fear of the costs must not now lead to the grid expansion, which is slowly getting underway, or even the expansion of renewables being delayed again."

Peter also criticizes the lengthy approval procedures, even when renewing existing lines. She is calling for regulations that allow existing grids to be upgraded without the need for time-consuming approvals. These aspects were not sufficiently taken into account in the latest amendment to the Energy Industry Act.

The results of the study showed that, in addition to a strategically planned expansion of the electricity grids, short-term measures and reforms are also necessary in order to achieve the climate targets by 2045. "If the pace is not further accelerated here, the grid expansion will continue to push the expansion debt forward like a bow wave."

The study "Expanding the electricity grids: Investment needs" by the Institute for Macroeconomics and Business Cycle Research is available for download.

Author: Stefan Sagmeister, E&M powernews