As the share of renewables continues to grow in Germany’s energy mix, the International Energy Agency (IEA) recommends that the country optimise its electricity system to lower costs and accelerate emissions reductions, particularly in end-use sectors. According to the IEA’s latest Energy Policy Review, a more efficient and resilient power system is key to ensuring a secure and affordable energy transition.
Germany’s long-standing Energiewende policy aims to transition the country to a system based largely on renewable electricity. This transformation is seen as a strategic opportunity to strengthen energy security and economic competitiveness. Despite progress, significant efforts are still required to meet the goal of climate neutrality by 2045. These include expanding grid infrastructure, reducing electricity prices, and cutting emissions in sectors such as transport, buildings, and industry.
The IEA highlights Germany’s exit from nuclear energy and the decline in coal-fired power, alongside a major increase in wind and solar capacity. However, challenges remain—particularly those stemming from the energy crisis triggered by reduced Russian gas supplies to the EU. High electricity prices and regional imbalances are impacting affordability and economic performance. The report emphasizes that continued growth in renewable energy, grid upgrades, enhanced flexibility, and measures to protect consumers will be critical to progress.
Transport, as Germany’s highest-emitting sector, requires focused attention. A mix of solutions—including electric vehicles, biofuels, and improved public transport—will be necessary. The IEA notes that consumer incentives and investments in EV charging and rail infrastructure will be vital to cutting transport emissions in line with national targets.
Improving the energy efficiency of Germany’s aging building stock is another priority. Recent legislative steps, such as the Buildings Energy Act and the Heat Planning Act, lay the groundwork for decarbonising heating through district systems and heat pumps. The IEA underscores the importance of consistent implementation and ongoing public engagement to achieve meaningful results.
Germany also has ambitious plans to build a hydrogen economy, with a focus on replacing fossil fuels in hard-to-decarbonise industrial sectors. The national hydrogen strategy includes innovative frameworks for market creation and infrastructure financing. Yet, the IEA points out that investment commitments are lagging, and recommends stronger government action to stimulate demand and accelerate project development.
The IEA routinely reviews the energy and climate policies of its member countries, offering guidance to support policy development and encourage knowledge sharing. Overall, the report concludes that Germany has a unique opportunity to capitalise on its industrial and technological strengths through its energy transition. Success, however, will depend on how well the country addresses current challenges related to energy costs, public support, and industrial competitiveness.
