German minister presents plans to reduce cost of energy transition

German Economy Minister Katherina Reiche on Monday urged a change of course in the country's phase-out of fossil fuels, stressing the need to bring down costs in order for the shift to renewable energy to be successful.

Germany's energy transition is at a crossroads, Reiche said in Berlin while presenting a report monitoring progress on the path to net zero.

Germany has committed to climate neutrality by 2045. But in order for the country to stay on course, efforts need to centre on reliability, supply security, affordability and cost-effectiveness, Reiche said.

The country's energy supply must be efficient enough to prevent industry, consumers and the state from being overburdened with the costs of the transition, she stressed.

While saying she plans to stick to legal targets for expanding renewable energy generated from wind and solar, Reiche said the expansion must be better managed, announcing plans to review subsidies.

Expansion of renewables'on track'

Based on the report's findings, the minister plans to implement 10 "key measures," including systematically lowering subsidies, with Reiche aiming to pass legislation by the end of the year.

While general promotion of renewables is set to continue, a fixed rate for solar power generated from new installations and fed into the grid is to be abolished under the plans, for example.

The report, commissioned by Reiche's ministry, was compiled by the BET consultancy and the Institute of Energy Economics at the University of Cologne (EWI) to gauge expected electricity demand, the expansion of renewable energies and electricity grids.

It also highlighted potential areas for greater cost efficiency and is to set the tone for energy policy under the new conservative-led government that took office in May.

"We have tried to make it clear that we are on track in terms of expansion targets," said BET managing director Alexander Kox. "But we have also tried to make it clear that we have lost sight of the costs a little."

Reiche has spoken out in favour of focusing energy policy on costs and supply security in light of Germany's stuttering economy.

Her predecessor Robert Habeck, serving in the post under the previous centre-left administration, heavily promoted the expansion of renewables, primarily from wind and solar power.

However, increasing interventions have become necessary to prevent the grid from becoming overloaded as efforts to expand infrastructure are stalling - costly measures that have pushed up grid fees, which in turn fuel electricity prices for consumers.

Today's energy prices are weighing on the economy, Reiche said, declaring to better control the expansion of renewables.

Reduced consumption forecast

According to the report, projected electricity consumption in the coming years is set to amount to between 600 to 700 terawatt hours in 2030. Current consumption stands at about 510 terawatt hours, according to Reiche.

However, the minister said she assumes actual consumption to be in the lower end of the estimated range, as German industry is taking its time to wean itself off gas, coal and oil.

Reiche had previously said that she believes consumption estimates made by the previous administration were too high.

Given today's consumption and taking into account an adjustment in demand in the coming years, Germany remains on track to source 80% of electricity from renewables by 2030, she said.

In the first half of 2025, some 54% of electricity was generated by renewables.

Gas power plants as backup

Among the minster's most controversial propositions are plans to build new gas power plants.

As Germany continues to wean itself off coal, they are set to guarantee supply in times when renewables are unable to meet electricity demand, according to Reiche.

Under the plans, the government is to provide billions in subsidies for the construction of the new plants, with Reiche confirming that first tenders are to be launched by the end of the year.

Environmental organizations such as Greenpeace accused the minister of clinging to fossil fuels and slowing down the expansion of renewable energies.

Michael Kellner, energy policy expert for the opposition Green Party, noted that the more renewables are expanded, the less need there will be for expensive gas-fired power plants.

The Agora Energiewende think tank said Reiche's decision to slow down expansion of renewables was "short-sighted" and "costly" and send the wrong signal to the economy, as it was predicated on lower consumption forecasts for 2030 compared to estimates made by the previous government.