EU analysis: Germany's energy system with light and shade

05.06.2026

Source: E & M powernews

Every year, the EU assesses the progress made by member states in a number of areas. One finding: Germany uses too many fossil fuels, which makes energy expensive.

The EU Commission's "Country Report" is the European Commission's annual country analysis. Each year, the Commission examines the extent to which the EU states are on an economic course that strengthens competitiveness, keeps public finances stable and supports the common EU goals - for example in the areas of climate, energy or the labor market.

For the German energy sector, the verdict on Germany in the "Country Report" is mixed. The Commission sees progress in the expansion of renewable energies and energy infrastructure, but continues to identify significant deficits in grids, digitalization, flexibility and energy costs.

One of the main strengths is the expansion of renewable electricity generation. In 2025, 61.1% of electricity generation came from renewable sources. This was supported by higher tendering volumes, accelerated approval procedures and a growing market for long-term electricity supply contracts.

The Commission also positively assesses regulatory progress such as the Hydrogen Acceleration Act, the Geothermal Acceleration Act and new regulations for the expansion of onshore and offshore wind energy. Investments in hydrogen capacities are also highlighted.

Brussels also recognizes progress in the expansion of transmission grids. Around 2,000 kilometers of power lines were approved in 2025, including 1,280 kilometers of new construction. Compared to the previous year, this represents an increase of 45 percent. Nevertheless, the transmission grids continue to represent a bottleneck for the transportation of electricity. This results in redispatch costs of around three billion euros per year.

Problem: High fragmentation of the German distribution grid sector

There is also a need for action in the distribution grids. Although investments are increasing there, at the same time the requirements of electromobility, heat pumps and battery storage are growing significantly. Connection requests for large storage projects can often only be processed with a delay. Another problem cited by the Commission is the strong fragmentation of the German distribution grid operator landscape with more than 850 grid operators.

Brussels is particularly critical of the smart meter rollout. At the end of 2025, only 5.5 percent of customers were equipped with smart metering systems. The EU average was 63 percent. As a result, potential for more efficient grid operation and more cost-effective grid expansion would remain untapped.

Another point of criticism concerns the lack of flexibility in the energy system. Germany has made significant progress in the expansion of wind and solar energy, but does not yet have sufficient storage, load management and other flexibility options. As the proportion of renewable energies increases, this will increasingly become a problem for security of supply and system stability.

At the same time, the Commission believes that Germany remains heavily dependent on fossil fuels. Although renewable energies now dominate electricity generation, oil, natural gas and coal continue to play a central role in overall energy consumption, including the transport sector. In 2024, oil accounted for around 37% of total energy consumption, natural gas for 26% and coal for 15%. Renewable energies accounted for around 20 percent.

According to the Commission, this structure contributes to the continued high energy prices. Despite government relief measures, electricity prices for households were still 31% higher than the EU average in 2025. For companies, the gap was seven percent.

Brussels also sees a backlog in the expansion of storage facilities, north-south power lines, cross-border connections and the digitalization of the energy system. In the building sector, progress in energy efficiency is recognized, but the renovation rate of less than one percent per year is not sufficient to achieve the climate targets, according to the Commission.

The "2026 Country Report - Germany" is available for download on the EU Commission's website.

Author: Stefan Sagmeister