11/02/2023
Source: Energy & Management Powernews
The energy transition will require annual investments of 240 billion euros across all sectors by 2030, according to a forecast by the Institute of Energy Economics (EWI) in Cologne.
In a plan scenario, the EWI calculated the investments required to implement the energy transition by 2030. The Institute of Energy Economics at the University of Cologne came up with an annual requirement of 240 billion euros. It looked at the transport, residential building and electricity supply sectors. The investment required in residential buildings alone for energy-efficient refurbishment and new heating systems would account for around half of this.
The authors of the study conclude that the overall level of investment would have to increase significantly compared to previous years. In the electricity supply sector, for example, total investment in renewable energies, power plants and grids would have to roughly double compared to historical levels. The additional capital requirement could shift macroeconomic conditions and entail several implementation challenges.
In the analysis "Investments in the energy transition up to 2030 - investment requirements in the transport, residential building and electricity sectors", a team calculated further economic aspects of these investments. It is part of a report for the German Energy Agency (Dena) entitled "Towards climate neutrality". The EWI scenario is expanded to include current political objectives. The calculated estimated value for the investment requirement is derived from an assumed investment trajectory and typical current investment costs.
Investment requirements of the sectors under consideration
In the scenario under consideration, the need for new investments in the three sectors mentioned amounts to a total of around 1.9 trillion euros by 2030. The largest share, at around 1 trillion euros, would be accounted for by the renovation and modernization of residential buildings and plant technology. In the transport sector, the greatest need for investment would arise from the partial replacement of the vehicle fleet. This could cost around 317 billion euros by 2030. According to the analysis, companies and households would have to invest an average of 53 billion euros per year in the electricity supply sector, primarily in renewable energies and electricity grids.
The analysis only looked at some of the investments directly and indirectly associated with the energy transition. For example, the investment requirements in industry, the gas and hydrogen industry and other areas of heat supply were not considered. According to the authors, there is also an extensive indirect need for investment, for example in the further development of production capacities, value chains or the necessary transport infrastructure.
In addition, no price effects from the significant increase in demand for the necessary capital goods and labor were taken into account. The total investment requirements of the energy transition are therefore likely to be even higher than the calculated amount if the plan scenario examined is realized. An investment delay has already occurred since 2018. This amounts to around 220 billion euros and therefore around ten percent of the total investment requirement. The biggest delay is in the electricity sector, both for renewable generation plants and for grids.
These higher investments in the sectors under consideration would account for more than six percent of gross domestic product, an increase on the current level. With a constant economic savings rate, this capital requirement would have to come at the expense of investments in other sectors. Otherwise, the overall economic savings rate or capital imports from abroad would have to increase. In addition, there are particular challenges for equity providers, especially municipalities as owners of municipal energy supply companies.
The EMI analysis on investment requirements for the energy transition is available online.
Author: Susanne Harmsen
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