Germany's energy exports

Official Name: Federal Republic of Germany.

Summary: Germany is Europe’s largest economy, and was the third -largest in the world in 2023. Germany’s energy sector is determined by its economic profile as an exporter of heavy industrial products requiring large amounts of energy.

Germany’s modern history is marked by its military involvement in World Wars I and II. In the early twentieth century, Germany’s level of manufacturing was second only to the United States and therefore had massive energy needs. The military defeat and resulting destruction of the nation’s infrastructure, both in 1918 and in 1945, severely affected the country’s economic productivity and led to a precipitous decrease in energy demand right after the wars. The so-called economic miracle, or Wirtschaftswunder, after 1945, however, was driven by export demand for heavy machinery and created a new, large-scale energy sector.

Postwar Energy Development

The experience of two world wars fostered intra-European cooperation across country borders. The vision was to build a peaceful Europe by regulating defense-related industries in a cooperative manner. This spirit marked the beginning of the European integration in the 1950s with the European Coal and Steel Community (Montanunion) to jointly manage the coal and steel production of Germany, France, Italy, the Netherlands, Belgium, and Luxembourg. The Coal and Steel Community quickly developed new powers. In 1957, the Treaty of Rome enhanced supranational cooperation even further, establishing the European Economic Community (EEC). The EEC later led to the foundation of the European Community and, eventually, to the European Union.

The framework of the European Community, with its internal market, also laid the foundation for cross-border trade of electricity. In the early days of liberalization of electricity markets, this fueled fears among German electricity producers of cheap water from Scandinavia and nuclear power from France. This fear proved unfounded, and German suppliers benefited from the liberalized market. Because of its vast coal resources, Germany traditionally relied on coal-fired electricity plants. The reunification of West and East Germany in 1989–90 had a big impact, not only on economic development and public deficit but also on energy policy. Unification brought the heritage of the former East’s energy production sites, with their significant need for refurbishment and adequate coal-waste management.

In 2023, Germany was Europe’s largest economy and the third-largest in the world. That same year, Germany’s gross domestic product (GDP) amounted to $4.456 trillion ($61,900 per person, in terms of purchase power parity, or PPP). Germany was Europe’s second most populous nation after Russia, with 84.1 million people and a population growth rate of –0.12 percent, including migration. Germany was a leading exporter of machinery, vehicles, chemicals, and household equipment in the twentieth and twenty-first century, and was among the world’s largest producers of iron, steel, coal, and cement. This industry profile, as well as Germany’s orientation toward being an export economy with a big transport sector (with $2.104 trillion in exports in 2023), shaped Germany’s energy consumption patterns. Historically, its main trading partners have been France, the United States, and the Netherlands.

Germany’s energy policies in the twenty-first century were largely geared toward greater energy efficiency and the introduction of the use of more renewable energy resources in all sectors. The Federal Ministry of Economics and Technology stated that its goal is to decrease greenhouse gas emissions by 55 percent by 2030 when compared to the 1990 values.

Policy Making and Electricity Producers

The Federal Ministry of Economic Affairs and Energy is the lead ministry responsible for the formulation and implementation of energy policy. Due to the federal structure of Germany, however, the federal states, or Laender, also have responsibilities in the implementation of these policies. According to the Federal Ministry of Economic Affairs and Energy, the principles that guide its energy policy are energy efficiency, security of supply, and environmental compatibility. Alongside the Federal Ministry of Economic Affairs and Energy, two national ministries are engaged in energy policy making: the Federal Ministry of the Environment, Nature Conservation and Nuclear Safety, which is in charge of environmental policies, including those that address climate change and the safety of nuclear facilities, and the Federal Ministry of Transport, Building and Housing, the authority responsible for transport-related issues. Germany imposes several different taxes or fees (excise taxes, royalties, concession fees, eco-taxes, and value-added taxes) on different energy sources.

The energy sector was redesigned by the Energy Industry Act of 1998 (Gesetz zur Neuregelung des Energiewirtschaftsrechts) and the Competition Act of 1999 (Gesetz Gegen Wettbewerbsbeschränkungen). These advanced the liberalization of the electricity and gas markets in Germany, and also took into account respective European Union (EU) legislation. The Federal Cartel Office, as well as the local antitrust agencies of the Laender, are responsible for monitoring the free market access. To promote alternative energies, the German government in 2000 passed the Renewable Energies Resources Act (Gesetz für den Vorrang Erneuerbarer Energien). In 2001, the Federal Ministry of Economics and Technology described the way forward in the energy report Sustainable Energy Policy to Meet the Needs of the Future.

Germany’s legislation, as is the case with all EU members, is strongly influenced and often determined by EU legislation. Examples of these directives are the Ecodesign Directive (in 2009) for energy-consuming products and the EU Energy Services Directive (in 2006), which promotes energy efficiency through market-based mechanisms.

The German Energy Agency (DENA), founded in 2000, was responsible for developing new ideas and strategies for energy efficiency and renewable energy. Two of these measures were the Renewable Energies Export Initiative (REEI) and the Energy Efficiency Export Initiative (EEEI), to showcase German renewable energy technology. Other programs to promote sustainable energy included the Integrated Energy and Climate Program (IEKP), for state-of-the-art and climate-friendly energy policy, and the International Partnership for Energy Efficiency Cooperation (IPEEC).

Germany’s attempts to become known for leading renewable energy research, policy, and production led it to the final-round competition to host the International Renewable Energy Agency (IRENA). However, the vote ultimately gave that honor to the United Arab Emirates in 2009.

Germany’s 2013 energy transition policy, called Energiewende, focused on increasing sources of renewable energy, phasing out nuclear power generation, and reducing the country’s dependence on energy imports through the year 2050. Following the Fukushima nuclear disaster in Japan in 2011, Germany accelerated its plans to phase out nuclear power by 2022. During that year, Germany announced that all but three of its seventeen nuclear reactors had been decommissioned.

Energy Balance and Electricity Consumption

Germany accounted for a total energy consumption of 3,170 terawatt hours (TWh) in 2023. Of that, 49,331 gigawatt-hours (GWh) of electricity were imported to the nation. The total electricity supply included 33 percent coal, 21 percent from wind power, 15.6 percent natural gas, and 10.3 percent solar. This confirmed that Germany still was heavily dependent on coal and fuel when it comes to electricity production, and led to increased implementation of renewable energy.

Carbon-related emissions in Germany declined steadily to 603 million tons of carbon dioxide (CO₂) in 2022, down 26 percent from 2000. Coal and oil were the largest contributors to the nation's emissions, with 36 percent each. Natural gas was responsible for 25.1 percent. In an effort to move away from its reliance on coal and fuel, Germany committed to renewable energy sources generating 30 percent of the gross energy consumed by the country by 2030.

Oil Dependency and the Economy

The price of oil has long been crucial to Germany’s economy, with its significant share of heavy industries, which historically relied on crude oil products. In 2022, Germany needed to import 96.9 percent of its oil consumption. Germany’s oil imports come from a diverse set of suppliers. Russia was the most important source of energy, delivering 34.1 percent of Germany’s import needs in 2022, followed by the United States, Kazakhstan, and Norway.

Oil accounted for 33.4 percent of Germany’s primary energy use in 2022, the majority of which was used for transport. The category of transport includes passenger cars as well as freight transport by road. Government agencies predicted that more efficient engine designs will reduce oil consumption to 60 percent of 2005 levels by 2050. Germany also explored new transport concepts (such as fuel cells and car sharing); the stated goal is a transition to new technologies, such as electric cars. Rail is an important part of this proposed transition, and biofuels are gradually being introduced.

In February 2022, Germany ended its partnership with Russia in developing the Nord Stream 2 natural gas pipeline after Russia officially recognized the Ukrainian pro-Russian separatist states of Donetsk and Luhansk in February 2022 and invaded Ukraine just days later. The $11 billion pipeline, which is already constructed, was in its final stages of certification at the time of Germany's departure. The Russian invasion of Ukraine further complicated the energy situation in Germany, and many questioned and criticized Germany's overwhelming reliance on Russia for its oil and natural gas. (Germany imported approximately 50 percent of its natural gas from Russia in 2021.) Germany resisted initial pressure to place an embargo on Russian oil and gas, and cited the immense damage to the German economy that would result from any fuel embargo against Russia. In April 2022, the German government announced emergency plans to explore alternative suppliers for its oil and gas imports in order to decrease its reliance on Russia.

Renewable Energy and Energy Efficiency

The renewable energy trend started with the need for energy security and the realization that Germany is greatly dependent on fossil fuels; this realization was solidified by the energy crises of 1973–74 and 1979–80. Germany is part of the European Union Emission Trading Scheme, and levied an ecotax on natural gas, heating oil, and electricity (which includes renewable energy), as well as on road fuels (diesel and gasoline). Coal and nuclear energy have been excluded from taxes. In net electricity consumption, 18.6 percent came from renewable sources in 2022, which is the equivalent of an increase of 403 percent from 2000.

The Federal Ministry of Economics and Technology forecasted that households will consume 14 percent less energy by 2030 compared to 2002 and that renewable fuels will cover 8 percent of fuel needs. Several initiatives were launched to achieve this goal. The North Sea Offshore Initiative, for example, brought together all North Sea countries plus Ireland and Norway for large-scale wind energy development some 31 miles (50 kilometers) off the coast.

At the same time, energy efficiency has remained a key priority. In the residential sector, most of the energy consumed was used for heating. Therefore, the promotion of energy-optimized buildings has been a very effective way to improve Germany’s energy balance. In 2007, the Federal Ministry of Economics and Technology introduced a new funding concept for energy-efficient communities, EnEff:Stadt. This included a wide range of existing technologies such as the combined generation of heat and power (CHP), innovative insulation, waste heat recovery, and intelligent information technology to facilitate sustainable urban planning.

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