Cost of the German energy transition: around 1,000 billion euros needed by 2035

Maurice Forgeng, Epoch Times

In brief:

• According to McKinsey, the German energy transition will cost around 1 trillion euros by 2035.
• So far the energy transition has already cost taxpayers hundreds of billions of euros.
• McKinsey proposes mobilising more private money for the energy transition in future.
• Germany is at risk of missing 9 of 15 energy policy targets.

The energy transition requires a substantial overhaul of our energy infrastructure. This overhaul, already under way, is expected to swallow between 780 and 1,035 billion euros over the next ten years – around 1 trillion euros.

According to “WELT” (German), this is the conclusion of the new “Energy Transition Index” of the consultancy McKinsey. This required investment covers the entire infrastructure need – both public and private investment – for grid expansion, power generation, heat and hydrogen. McKinsey explicitly calls for greater involvement of private investors to cover the financing.

According to McKinsey, the largest cost item, at 680 to 910 billion euros, is the electricity supply. Around half of this is accounted for by renewable energy.

The trillion does not yet include investments such as solar panels on house roofs, building renovations for a better energy balance in the building sector or the installation of heat pumps or wall boxes. Private individuals, primarily small property owners, remain responsible for these.

Costs of the energy transition so far

For around 25 years, Germany’s electricity system has been changing drastically: more and more large central power stations have been replaced by millions of small power plants such as photovoltaic and wind installations.

There is no specific figure for how much the energy transition has cost to date. Various sources, however, put the expense at several hundred billion euros. The amount depends heavily on the factors included and the periods chosen.

The Wirtschaftsdienst of the Leibniz Information Centre for Economics speaks (German) of almost 250 billion euros in differential costs for the Renewable Energy Sources Act alone between 2000 and 2020. The Stiftung Marktwirtschaft estimates (German) this cost area at more than 400 billion euros from 2000 to 2030.

On top of this come expenses for redispatch (German) measures, compensation for renewable power not fed in (German) and exported electricity (German) at negative prices (German) on the power exchange.

Previous cost calculations and McKinsey’s new results suggest that the energy transition is becoming ever more expensive over time.

More private money in future?

According to McKinsey, the money for the infrastructure overhaul comes mainly from municipal utilities. These sources of finance, however, are already quite overstretched.

In the view of Sebastian Overlack, partner at McKinsey and co-author of the study, it is necessary to mobilise more private capital for energy transition spending in future. He said:

“Germany does not have a capital problem – the problem is access to that capital.”

Many targets still out of reach

Despite the high past and future spending on the energy transition, McKinsey suspects that Germany could miss (German) 9 of 15 related policy targets. Accordingly, only six targets are realistically achievable. The consultancy considers five “unrealistic”, and four are still “in the balance”.

One clearly missed target is grid expansion. Of the 7,904 kilometres (km) of new extra-high-voltage lines planned, Germany has so far only managed to build 4,045 km. Not even the second half of 2025, which saw record expansion, could change this – here too the players did not reach the necessary pace.

The expansion of renewable energy sources made a better impression. Photovoltaics in particular is expanding at a rapid pace. As early as August this year, Germany reached (German) its 2026 annual expansion target of 128 gigawatts of rated capacity.

The reduction in primary energy consumption also looks good. It has mostly been falling in recent years. It fell (German) from around 13,400 petajoules (PJ) in 2015 to around 10,550 PJ last year. It should be mentioned, however, that a major reason (German) for falling energy consumption is the high number of closures (German) of domestic business sites.

This article first appeared in German in Epoch Times – with kind permission of Maurice Forgeng. Translated from German by GAIA.
Cover image: analogicus / Pixabay