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May 24, 2016

Germany’s renewables electricity generation grows in 2015, but coal still dominant

graph of Germany gross electricity generation by fuel source, as explained in the article text
Source: U.S. Energy Information Administration, based on German Statistical Office (Destatis) and AGEB- AG Energiebilanzen e.V.

Renewable electricity generation in Germany increased to 194 billion kilowatthours (kWh) in 2015, representing 31% of the country's gross electricity generation. The renewables electricity growth in 2015 was the largest in both percentage and absolute terms (19% and 32 billion kWh, respectively) in at least a decade.

Germany's Energiewende, or energy transition policy, focuses on renewable energy and sustainable development. Energiewende goals include eliminating nonrenewable energy sources from Germany's energy portfolio, phasing out nuclear power generation, reducing dependence on energy imports, and lowering carbon emissions. Official goals call for greenhouse gas reductions to 80% to 95% of 1990 levels by 2050 and a gradual phase-out of nuclear power by 2022. In 2015, 44% of Germany's electricity production was generated from coal, 11% from other fossil fuels, and 15% from nuclear energy.

Electricity generated from renewable sources has tripled in Germany over the past 10 years. Based on Energiewende goals, the share of power generated from renewable sources is set to increase to 40% to 45% by 2025 and to more than 80% by 2050. Most of Germany's expected growth in renewable electricity comes from solar photovoltaics (PV) and wind, which currently provide 20% of Germany's total electricity. Hydropower and other renewables such as biomass and waste provided 11% of Germany's overall electricity supply in 2015, but these shares are not expected to grow significantly.

The German government has supported renewable electricity growth by promising a fixed, above-market price for every kilowatthour of energy generated by solar PV or wind and delivered to the grid, a policy known as a feed-in tariff. By law, these renewable sources have priority over traditional generation, meaning that other forms of generation must be curtailed to accommodate fluctuations in renewable electricity generation. Over the past five years, these policies have helped to double the amount of wind generation.

Wholesale electricity prices in Germany have been declining, but residential retail prices have risen and are expected to continue to increase because of higher taxes and fees charged to consumers. For instance, one surcharge for renewable electricity increased from 8.8% of the residential electricity price in 2010 to 17% in 2013. Taxes and surcharges make up about half of the average residential electricity rate, and tariffs account for the remainder. In 2014, the average sales-weighted retail price for residential consumption in Germany was about 35 cents/kWh, while the average residential retail price in the United States was about 13 cents/kWh. Along with Denmark, Germany has among the highest residential electricity prices in Europe.

As a net electricity exporter, Germany's rapid growth in electricity production has created problems for both Germany and its neighbors. Germany currently lacks the infrastructure to send surplus electricity from the north to the more populous areas in the south. A large volume of the surplus power instead flows through transmission grids to Germany's neighbors, often creating power surges. Poland and the Czech Republic have invested in technology to avoid blackouts from power surges that originate in Germany on particularly windy days. Germany has identified the need for more than 3,800 kilometers of new transmission lines that would run from the north to the south of Germany to meet increasing growth in both electricity demand and supply, but these infrastructure proposals have been opposed by municipalities and citizens.

Last year Germany signed several agreements with its neighbors to integrate power markets and to eliminate overcapacity of the grid. The electricity grid problems in Germany reflect a larger, continentwide problem that has been elevated to the European Commission in Brussels, where policy makers advised that an integrated, renewables-focused electricity market should be a political priority for the European Union.

Germany has made several changes to its energy policies to promote renewable growth while also controlling costs. In 2014, changes were made to the feed-in tariffs. In the future, instead of fixed tariffs, electricity producers may have to compete in auctions. If renewable growth targets are exceeded in a given year, the feed-in tariff incentives for the following year would decrease to balance the growth.

Principal contributor: Sara Hoff