Short-sightedness in the energy sector is a cause for concern!
In the heart of Europe, Germany is grappling with the economic implications of transitioning to a renewable energy system. The country's ambitious renewable energy goals have been met with challenges, but the benefits are becoming increasingly evident.
The gas and electricity price brake has placed a significant burden on the German budget, five times the annual EEG funding costs. This is due, in part, to the occurrence of negative electricity prices in the German electricity zone. From January to August 2025, these negative prices occurred in 401 hours, with an average fossil share of electricity production of 12%. During these hours, the average share of wind and solar was a staggering 78%, reaching a maximum of 83%.
These negative prices occur when a high and inflexible electricity generation meets a simultaneously low demand, primarily composed of renewable plants and inflexible, mostly fossil power plants, as stated by the German Federal Network Agency. However, advancements in battery storage are addressing this issue, stabilising market prices, increasing the market value of wind and solar, and reducing the average spot market electricity price and EEG subsidy costs.
The economic benefits of renewable energy expansion are numerous. As of 2024, 91% of newly commissioned renewable energy projects were cheaper than the cheapest new fossil fuel alternatives, leading to avoided fossil fuel costs valued at about USD 57 billion globally in 2024 alone. Battery storage costs have also dropped by 93% since 2010, further enhancing renewables’ competitiveness.
Renewables have driven significant job growth, with 16.2 million renewable energy jobs existing globally by 2024. In the U.S., clean energy jobs grew nearly 5% in 2023, outpacing overall GDP growth and creating hundreds of thousands of jobs. Investments in clean energy ($2.1 trillion worldwide in 2024) stimulate local economies and innovation.
Modeling suggests that a shift to renewables could lower wholesale electricity prices by 20–80% by 2040, depending on region, allowing wage increases of 2–5% nationwide in the U.S. This reflects enhanced productivity and economic competitiveness in renewable-rich areas.
Fossil fuels, on the other hand, impose large external costs, including climate damages, health impacts from pollution, and geopolitical costs. The social cost of carbon is estimated around $104 to $185 per ton, translating into significant economic damage that fossil fuel prices do not internalize.
In the context of the Ukraine war, the gas price crisis has shown the risks of dependence on fossil fuels. An energy system based on renewable energies is significantly more resilient due to its lower dependence on imports of fossil raw materials and volatile fuel prices.
In summary, expanding renewable energy provides economic gains through lower costs, job creation, higher wages, and reduced externalities, whereas fossil fuel subsidies exacerbate market failures by hiding true social costs and impeding cleaner, more efficient energy transitions. This makes the economic case for renewables not only environmentally urgent but financially compelling.
In Leipzig, the municipal utilities are a key actor in implementing the city's aim for climate neutrality by 2040. Despite the costs of renewable energy expansion, Karsten Rogall, commercial manager of the Leipzig municipal utilities, believes that promotion should be stopped. The EEG promotion costs of renewable energies result from the difference between guaranteed revenues and market values achievable on the spot market. The expansion of grid infrastructure is necessary for transitioning to a renewable energy system, with investment costs amortized over time via network charges.
References:
[1] International Renewable Energy Agency (IRENA). (2022). Cost of renewables 2022. [Online]. Available: https://www.irena.org/publications/2022/Mar/Cost-of-renewables-2022
[2] World Bank. (2019). Subsidies for Fossil Fuels. [Online]. Available: https://www.worldbank.org/en/topic/energy/brief/subsidies-for-fossil-fuels
[3] U.S. Bureau of Labor Statistics. (2023). Employment in the Renewable Energy and Energy Efficiency Industries. [Online]. Available: https://www.bls.gov/opub/ted/2023/employment-in-the-renewable-energy-and-energy-efficiency-industries-in-may-2023.htm
[4] World Resources Institute. (2019). The Social Cost of Carbon. [Online]. Available: https://www.wri.org/resources/analysis/social-cost-carbon
[5] National Renewable Energy Laboratory. (2020). Grid Modernization and the Future of Electricity Markets. [Online]. Available: https://www.nrel.gov/grid/research/grid-modernization.html
- The economic burden on the German budget from the gas and electricity price brake is five times higher than the annual EEG funding costs, partly due to the occurrence of negative electricity prices, which were prevalent in 401 hours from January to August 2025.
- Advancements in battery storage are effectively addressing the issue of negative electricity prices, as they stabilize market prices, increase the market value of wind and solar, and reduce the average spot market electricity price and EEG subsidy costs.
- In 2024, 91% of newly commissioned renewable energy projects were cheaper than the cheapest new fossil fuel alternatives, leading to avoided fossil fuel costs valued at about USD 57 billion globally, and battery storage costs have dropped by 93% since 2010, enhancing renewables’ competitiveness.
- The shift to renewable energy could lower wholesale electricity prices by 20–80% by 2040, depending on region, increasing wages of 2–5% nationwide, and this reflects enhanced productivity and economic competitiveness in renewable-rich areas, while fossil fuels impose large external costs that are not internalized in their prices.
