The prospect of a recession in Germany has brought back into focus the Energiewende – the country’s plan for transition to a low-carbon economy. The costs of the transition are beginning to be felt and Germany’s once all-powerful industrial base is shrinking. Renewables are providing an ever greater proportion of power yet the low level of capacity utilisation makes investment in the balancing supplies necessary to maintain energy security hard to justify. But if Germany is to deliver on its ambitious emissions targets, what has happened so far is just the beginning. The next steps will be harder and more disruptive. German energy demand continues to fall. After a 3 per cent decline last year the first few months of 2019 saw a further reduction. With a recession looming, the expectation must be that demand will fall even further. Demand fell even before the economic downturn and the latest numbers reflect a long-term trend. Germany uses 13 per cent less energy now than it did in 1990, despite the fact that the economy has grown almost continuously throughout that period. Some of that is down to efficiency gains but there has also been a marked shift in the structure of economic output. Over the past year, steel production has fallen more than 10 per cent and industrial production as a whole is down 5 per cent.
FT 2nd Sept 2019 read more »