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Published on: March 5, 2026 / Updated on: March 5, 2026 – Author: Konrad Wolfenstein
The myth of cheap electricity: Engineers plan, controllers warn: Will the energy transition collapse due to costs? – Image: Xpert.Digital
Germany faces the biggest and most expensive challenge in its post-war history: the energy transition. Technically, the path has long been paved – from state-of-the-art wind farms and massive hydrogen storage facilities to widespread photovoltaics, all solutions seem within reach and fascinating. But while engineers and politicians dream of perfect, "golden grids," economists and controllers are already sounding the alarm. The bitter reality: the transformation of our energy system is no longer a physical problem, but a gigantic financial risk. With projected costs of up to €5.4 trillion, the project far exceeds the country's entire economic output. Municipal utilities are facing empty coffers, companies fear for their competitiveness, and the once-cherished myth of cheap green electricity is proving to be an expensive illusion. If the energy transition is not soon transformed from technological idealism into a viable business model, it risks failing due to the stark realities of economics. This is an analysis of the uncomfortable truths that are all too often ignored in the current debate.
Almost every time a society wants to solve problems with technology, it faces a fundamental question: Which technology do we use? There are almost always multiple paths to the goal. Food can be heated in the microwave or the oven, laundry dries on a clothesline or in a dryer, heat comes from a heat pump or a pellet boiler, and public transport can mean tram or bus. Technically, many of these solutions are excellent. Economically, however, not all of them are. And it is precisely in this difference between technical feasibility and economic viability that the core problem of Germany's energy transition lies.
Human nature intuitively gravitates towards what it perceives as the best technology. There's an almost instinctive fascination with elegant, large, complex systems that function impressively. Nowhere is this phenomenon more evident than in China's high-speed rail network. In just a few decades, a network of over 45,000 kilometers has been built there, featuring state-of-the-art trains and connections between major cities. Anyone who has traveled on it immediately understands why there's a desire for Germany to follow its example.
What is often overlooked is the economic reality behind the technological brilliance. A report by China's National Audit Office revealed that high-speed trains alone incurred losses of over 100 billion yuan in the first half of 2024 (April to September). Of all the lines, only about six are profitable, all of them along the prosperous coastal belt between Beijing and Shenzhen. The state-owned railway company, China Railway, is groaning under nearly a trillion euros in debt, and yet unprofitable lines continue to be built inland. Every kilometer of new high-speed rail line costs approximately 18 million euros, and the additional 30,000 kilometers planned by 2035 would devour around 520 billion euros, a large portion of which will never generate a return.
In the network industry, there's a saying for this phenomenon: engineers want to build golden networks. What they mean is: technically perfect, maximally robust, maximally efficient, and maximally expensive. The businesspeople and controllers then get to play the role of the spoilsport, reminding everyone that even the most beautiful technology ultimately has to be paid for by someone.
This very conflict between technological idealism and economic pragmatism runs through the entire German energy transition. In September 2024, the German Association of Chambers of Industry and Commerce (DIHK) presented a study conducted by the research institute Frontier Economics. The findings are no longer a warning, but a wake-up call. If current energy transition policies continue, the total costs of the energy system will amount to between 4.8 and 5.4 trillion euros between 2025 and 2049.
This figure is abstract, and therefore it's worth putting it into perspective. Germany's total gross domestic product in 2024 was approximately €4.1 trillion. The energy transition thus consumes more than one and a half times what the entire German economy generates in a year. Breaking down these costs reveals the structural drivers: €2.0 to €2.3 trillion are attributable to energy imports, €1.2 trillion to grid costs for expansion and operation, €1.1 to €1.5 trillion to investments in energy generation, and around €500 billion to the operation of generation facilities.
The required investment momentum is particularly alarming. Annual private investment in the energy, industry, buildings, and transport sectors must more than double, from an average of around €82 billion between 2020 and 2024 to at least €113 to €316 billion in 2035. This corresponds to up to 40 percent of current total gross private investment in Germany. A country whose economy is shrinking is thus expected to simultaneously manage the largest investment surge in its post-war history.
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For years, it was claimed that renewable energies were now the cheapest form of electricity generation. What was systematically concealed was this: While the pure generation costs of a kilowatt-hour of wind or solar power may indeed be low, an energy system consists of more than just wind turbines and solar panels. It requires grids, storage facilities, reserve power plants for windless nights, hydrogen infrastructure, and a complete transformation of all end-use sectors.
The storage issue is particularly revealing. By 2045, Germany's hydrogen storage needs could rise to over 100 TWh. The cost of storing hydrogen in salt caverns ranges from €0.66 to €1.75 per kilogram and could thus account for up to a quarter of the total cost of hydrogen production. The entire hydrogen infrastructure, from core networks and storage facilities to distribution networks and power plants, requires additional investments of at least €50 billion, according to estimates by the German Technical and Scientific Association for Gas and Water (DVGW), on top of the €20 billion already allocated for the H2 core network. However, planning and constructing a single storage facility can take up to ten years, and the regulatory framework remains incomplete.
It is rightly pointed out that there is sufficient roof space available in Germany for the expansion of photovoltaics. There is no shortage of space. But space doesn't build installations. Investors do. And they ask about profitability. In 2024, photovoltaics in Germany generated a total of almost 90 TWh of electricity. Self-consumption has increased significantly, and the Fraunhofer ISE quantified the directly self-consumed PV electricity at an additional almost 17 TWh.
However, profitability depends crucially on the self-consumption rate. A 10 kWp system that feeds only electricity into the grid generates around €800 annually, while a 70 percent self-consumption rate brings in €2,100. Feed-in tariffs are steadily decreasing, and since the introduction of the Solar Peak Act, they can even be completely eliminated during periods of negative electricity prices. A PV system without sufficient self-consumption and adequate compensation remains a good idea, but not a viable business model. The controller is simply right in this case.
The problem isn't limited to national energy policy. It extends all the way to the municipal level. A PwC study revealed that German municipal utilities will face a shortfall of €346 billion over the next two decades, representing 65 percent of their total investment needs of €535 billion. Converting power plants from natural gas to biomass or replacing them with large heat pumps alone would cost €75 billion.
What further exacerbates the situation is that the profits of municipal utilities have almost halved, from an average of 13.5 percent in 2018 to 8.4 percent in 2023, while debt has nearly doubled from 2.4 to 4 percent. At the same time, many municipalities treat their public utilities like cash cows: instead of reinvesting the profits in urgently needed infrastructure, they are siphoned off to plug budget gaps or finance the loss-making public transport system. The energy transition is failing here not due to a lack of technology, but due to inadequate financial statements.
The DIHK Energy Transition Barometer 2024, in which around 3,600 companies participated, paints a picture of skepticism and uncertainty. On a scale of -100 to +100, companies rated the energy transition at -8.3. More than one in three companies (36 percent) assess the impact on their own competitiveness negatively, while only one in four sees it positively. High costs, unsustainable bureaucracy, and the overall challenging economic situation mean that fewer resources and financial means are available for climate protection. Many industrial companies are gradually relocating, with this trend increasing among large companies.
Uncertainty about the government's energy policy is increasing this reluctance. Businesses are waiting to see what happens. In many places, the energy transition is on hold. But an economy whose industrial base is eroding cannot afford an energy transition, and an energy transition that erodes the industrial base misses its mark.
The energy transition is primarily an economic problem, not a technical one. All the necessary technologies exist, from heat pumps and photovoltaics to electrolyzers. The physical and engineering fundamentals have been solved. What's missing is a viable economic model that determines who pays for this transformation, and this determination is incredibly difficult. Because it touches on distributional issues that can only be negotiated with great difficulty within the political system.
The engineer sees the problem and opts for the most elegant technical solution. The controller sees the calculations and recommends the most economically sensible option. Both are right in their own way, and therein lies the tragedy. The energy transition needs both: technological ambition and business acumen. But as long as the political debate is conducted as if costs were a bothersome detail and not the central challenge, the transformation will continue to stall. Not because of physics. But because of business management.
The German Chamber of Industry and Commerce (DIHK) has outlined an alternative path in its study, which includes, among other things, comprehensive grid planning, phasing out subsidies for already economically viable renewable energy plants, and the use of blue hydrogen and CCS technologies. Whether these proposals will garner a political majority is another question. What is certain is that the current strategy of technological maximalism, financed by political promises without a sound financial basis, has reached its limits. The energy transition must transform from an engineering dream into a viable business model. Otherwise, it will become the most expensive failed experiment in German economic history.
Konrad Wolfenstein
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© March 2026 Xpert.Digital / Xpert.Plus – Konrad Wolfenstein – Business Development
