2025
Global Power Transmission Report
Regional Market Overviews
Germany
GDP (Current Prices) USD (2023) | 4,527 Bn |
Projected Average GDP Growth (2024-2028) | 0.8% |
10-year Govt Bond Yield (12-month rolling average) | 2.3% |
Country Credit Rating | AAA |
Renewable Energy Share | 49% |
Total Transmission Line Length (Km) | 35,000 |
Transmission Network
The German power transmission network consists of about 35,000 km of total line length, with voltage levels predominantly at 220kV and 380kV AC. In addition, it has interregional transmission links based on HVDC, which play a vital role in cross-border power market transactions. Germany’s position as a transit country between the Western and Eastern European power markets makes its transmission infrastructure even more important (Federal Ministry, 2024). Network expansion has been a recent area of focus due to the pressure of renewable energy integration. Otherwise, long-term growth has been meagre, signifying a typically mature and industrial economy. Between 2014 and 2022, the line length registered a CAGR of 1.04% (Global Transmission, 2023).
The network needs new lines and equipment and refurbishment to extend its useful life. With rising renewable energy penetration and grid congestion/curtailment issues, the urgency of the matter has come to the fore. Policy-level interventions, such as expediting the grid expansion approvals, seek to address some of the persistent issues (Clean Energy Wire, 2024). Among the major transmission projects currently under development is the €2.8 billion NeuConnect Interconnector line, also the first power cable between the UK and Germany. Construction started in May 2024 and is scheduled for commissioning by 2028 (S&P Global, 2024). The regulatory approvals for adding transmission lines in 2024 and 2025 amount to 1,800 km and 1,600 km, respectively, in line length (Clean Energy Wire, 2024).
Lately, among the issues involving network growth, the regulator and TSOs have had to come to terms with the merits of underground vis-à-vis overhead lines. Several federal and provincial policy authorities recommended underground lines to avoid public opposition and disruption during extreme weather events. The regulator, however, concurred with the TSOs’ views, favouring overhead lines due to their lower costs (€35 billion in savings) (Clean Energy Wire, 2024). Cost is a key factor, as the grid fees (including distribution) typically make up about a quarter of the final consumer’s charges, which makes regulators generally reluctant to entertain tariff revisions.
Transmission Line Length
| TSO | Line Length (circuit km) |
|---|---|
| Amprion | 10,087 |
| TransnetBW | 3,200 |
| 50Hertz | 9,850 |
| TenneT | 11,863 |
| Total | 35,000 |
Note: TenneT’s line length is a derived estimate obtained by deducting the line length of other TSOs from a total of 35,000 km reported by the Federal Ministry for Economic Affairs and Climate Action
Source: Respective Transmission System Operators
Cross-border Transmission Linkage
| Country Linkage | TSO | About the Linkage |
|---|---|---|
| Germany – Denmark | 50Hertz (Germany) Energinet (Denmark) |
170 km long, 400kV HVDC line with 600MW capacity in operation since 1996. The EU-funded project, operational since 2020, links German and Danish offshore wind farms. |
| Germany-Czech | 50Hertz (Germany) CEPS (Czech) | A 380kV AC transmission link (augmented from 220kV) in operational since 1959. |
| Germany – Poland | 50 Hertz (Germany) PSE (Poland) | Two interconnector lines running at 380kV AC. A third is in planning phase. |
| Germany – Sweden | Baltic Cable AB | 260km long, 440kV HVDC line, with a capacity of 600MW |
Note: Baltic Cable AB, 100% owned by Norwegian company Statkraft Asset Holding AS, is designated as an independent Transmission System Operator under the German Energy Industry Act.
Source: 50Hertz
Drivers in Energy Transition
The German power system has been progressively operating with a rising share of renewable energy. With rapid capacity addition in wind and solar power capacities, the country is well placed to exceed its 2030 goals of renewable energy generation. The capacity addition trend signifies the same. The country had an annual average of 6.6GW in renewable capacity addition during 2018-2021. By the end of 2022 and 2023, it was 10GW and 18GW, respectively (IRENA, 2024). The pipeline has grown exponentially. Between 2024 and 2028, over 100GW of renewable power capacity is set to be auctioned (Rystad Energy, 2024). The policy thrust on getting renewables to minimise its reliance on energy imports (especially natural gas) has been a major propelling factor. Since the energy crisis of 2022, which arose from the Russian invasion of Ukraine, there has been a sharp decline in the dependence on gas imports. An even sharper decline is underway for coal.
From the grid operators’ perspective, the transition in the power mix is taking place on multiple fronts. One of them is coal-based power – a source of baseload capacity in a grid increasingly needed in balancing intermittent energy supply. In April 2024, 15 coal-fired plants, aggregating 3.1GW, were closed. The policy goal is to retire all of it by the end of the decade (Power Technology, 2024). To be sure, quite a few of the coal-fired plants were reactivated in 2022, as renewables and other sources of the power mix were insufficient to compensate for gas shortages. Since then, the stabilisation in gas supply and price helped ease the pressure on the power system.
Grid stability concerns are making utilities and regulators less favourable to the idea of an aggressive coal exit. The regulator, for instance, has designated some coal-fired plants as system-relevant until 2031. Furthermore, the stipulated timelines for keeping coal-based power in the power mix include keeping the last units active until 2038. Separately, the TSOs regard it as a systemic requirement to keep the coal-based power generation capacity as part of the grid’s reserve beyond the official date of a full shutdown (Argus, 2024).
An even sharper shift of energy transition took effect with the exit from nuclear power, as of April 15 2023, from the power system. Till then, nuclear power generation was contributing just about 1% (as shown in the accompanying chart) to the generation mix. The policy reasoning for this decision, as a combination of safety, costs, etc., has been subject to criticism, as the grid also lost a critical low-emission and competitive cost baseload energy source. The French experience shows the role of nuclear power generation capacities in enabling a lower emission profile for the power sector while meeting the grid’s baseload requirements.
Policy Regulation
The critical need for timely grid expansion is observed in the direct policy/regulatory attention. The Federal Ministry of Economic Affairs and Climate Change (BMWK) has been supervising and leading the vital policy matters related to the grid expansion and its related elements, including approvals, etc. The Grid Expansion and Acceleration Act (NABEG), brought into effect in 2011, guides most of the ongoing measures in the power transmission infrastructure (BMWK, 2024). The regulatory body, Federal Network Agency (Bundesnetzagentur in German), oversees the operation and management of the high-voltage power transmission network and thus also supervises the implementation of the NABEG.
Regulatory oversight for power transmission includes other relevant legislation, such as the Energy Industry Act, Federal Requirement Plan Act, and Power Grid Expansion Act. These norms guide the multi-staged processes related to planning, siting, permitting, public consultation, and approvals for transmission projects. Reform measures are in consideration, through changes in policy guidelines to address the longstanding need to rationalise the approval process. In May 2024, the lawmakers agreed on a set of reform steps for faster approvals in infrastructure projects (Clean Energy Wire, 2024). Recent experience has shown the impact of such measures. In the aftermath of the energy crisis of 2022, liberal permitting for renewable energy projects catalysed a rapid capacity addition.
The spike in renewable energy capacities is well aligned with the decarbonisation goals, but it poses a challenge for the TSOs. The incentives and grid charges constitute an important part of the TSOs’ grid expansion strategy since raising the necessary debt and funding depends on their approved returns. The regulations classify the utilities’ costs into controllable and uncontrollable categories. The former typically includes digitalisation and other similar measures to lower costs and qualifies for performance-based returns. The latter involves an approved return on equity (RoE) over the base rate through the traditional cost-plus approach. The regulator has recently raised the allowed RoE to 7% for the new projects financed after January 2024 as a partial relief for the grid utilities’ stepped-up capital expenditure (BNEF, 2024).
Market Opportunity
The regulatory authority’s estimates point to the commissioning of 1,870 km of total line length by the end of 2024. It includes major projects such as the interconnector project SuedLink (Clean Energy Wire, 2024). In March 2024, the agency shared the network development plan drawn for the period till 2045, in line with the goal of a climate-neutral power system (Federal Network Agency (Germany), 2024). The projected plans indicate a steep rise in the capacity base. About 4,800 km of line will be constructed, and another 2,500 km of reinforcing will be done. Importantly, the plan confirms the development of five new HVDC transmission lines, each with a power transfer capacity of 2GW.
HVDC transmission projects are vital for the commercial viability of the planned offshore wind power generation. The network development plan shows 35 transmission projects in the North and Baltic Seas to evacuate the 70GW offshore generation capacity targeted in the German Offshore Wind Energy Act. The planned infrastructure could be unprecedented in scale or complexity. Some of the early signs of progress include the equipment/technology tie-ups. As of July 2024, the TSOs formed partnerships with technology providers Hitachi Energy, Siemens Energy and GE Vernova for multi-terminal hubs with direct current circuit breakers. The proposed hubs will enable the links to new HVDC connections (renews.biz, 2024).
| TSO | Line Length (circuit km) |
|---|---|
| Amprion | 10,087 |
| TransnetBW | 3,200 |
| 50Hertz | 9,850 |
| TenneT | 11,863 |
| Total | 35,000 |
The massive asset expansion and overhaul involve a sharp rise in the capex commitment. As far as plans go, all the TSOs have outlined massive spending over the next 6-10 years. It is an unusual spike that is prompting the TSOs to explore all options. The TSO TenneT (an operator in the Netherlands and Germany) has a projected capex worth €160 billion for 2024- 2033, which is difficult to manage in the face of the TSO’s credit profile and the regulated asset base. The TSO is thus in the middle of many ongoing measures, such as the disposal of non- core assets and a series of negotiations for the sale of the German power transmission business (the TSO entity being owned by the Government of the Netherlands) (Moody’s, 2024). Earlier during the year, TenneT received recapitalisation support from the German government to help bridge capex requirements without impacting its credit ratings.
The scale of the announced capex plans is relatively smaller for other TSOs. In May 2024, 50Hertz announced €20.7 billion in capex over the next five years, reflecting a roughly five-fold rise compared to the spending of the past five years (SEI, 2024). Amprion’s investment goal is of similar magnitude, at €27.5 billion, though it is subject to a risky credit profile, as indicated in the Fitch Ratings Outlook of April 2024 (Fitch, 2024). All utilities face similar challenges in the financial market, arising from a weaker credit profile. Progressively, the grid fees and the regulated returns are in focus as utilities seek justified incentives for the capacity expansion expected of them. Regulatory authorities have been willing to allow better incentives, as observed in the recent approval for revised grid charges and the regulated returns on equity.
Outlook
The German power transmission network development plan for 2037/2045 projects 12,700 km of transmission line length (across AC and DC) as a confirmed plan of capacity addition. Another 950 km of transmission line length is from transmission projects that have not been confirmed (as of March 2024). It is likely that even these estimates could be revised upwards to match the rising requirements in grid connectivity and reinforcement (Federal Network Agency, 2024). Considering the progress so far, it imposes a huge requirement in project development and resourcing.
Despite the challenge, project cost and its financing may not be the deciding factors for the TSOs, considering the policy attention in this segment. However, implementation challenges and the resulting delays may drastically impact viability. In this context, there is a considerable risk for the TSOs. An example is the Federal Maritime and Hydrographic Agency’s January 2024 notification flagging possible delays in North Sea wind farm connectivity due to supply chain issues. Amprion and TenneT are responsible for the links related to the concerned notification (Renewables Now, 2024). Lengthy and cumbersome permitting rules put additional barriers to project development.
The measures undertaken to resolve ongoing issues, including those of permitting bottlenecks (e.g. exploring the existing railway track power lines to ease siting issues of new transmission lines), point to the seriousness afforded by the highest authorities. The progress in augmenting the transmission infrastructure will be keenly tracked by all stakeholders in the German energy space. The upcoming investments also present an opportunity to permanently transform the legacy grid into a modern, flexible power system.