Money is Not the Problem

The energy transition is a generational project. And one that costs a lot of money: In Germany, alone 1,200 billion euros must be invested by 2035.¹ But the money is there. The real hurdle is not being able to spend it fast enough. There are many reasons for this. In addition to regulatory issues and approval procedures, energy technology companies in particular are struggling to produce the enormous amount of infrastructure and technical equipment. 

Electricity is the fuel of our modern society. We need a lot of it—produced as quickly and environmentally friendly as possible. Efficient production, distribution and use is probably the biggest challenge since the industrial revolution. The term ‘energy transition’ is now firmly anchored in our language. It refers to the transition from fossil and nuclear energy sources to renewable energies such as wind, sun and water. To reduce CO₂ emissions, counteract climate change and ensure a sustainable energy supply, Germany aims to become climate-neutral by 2045.

Global goals and national challenges 

Global and European guidelines, such as the Paris Climate Agreement or the European Green Deal, set the overarching direction for the energy transition. Laws and regulations also set the framework for the expansion of generation plants and grid infrastructure at national level. Approval procedures in this area are among the most protracted. The construction of a wind farm can take up to six years. The expansion of the electricity grid will take even longer. In the last ten years, annual investment in German transmission grids has risen from three billion euros to 4.5 billion euros. The annual investment volume is set to grow to 26.4 billion euros by 2035.² This represents an increase by a factor of six. The systems affected are mainly transmission stations and substations. These are currently not standardized, which leads to long delivery times. The manufacturers' delivery times are currently up to 30 months.³ This goal cannot be achieved with the very individual and project-driven approach that has prevailed in the industry to date.

In order to meet these challenges, Germany is continuing to reduce bureaucratic hurdles. In view of declining regulations, companies are now more than ever called upon to make their contribution. With decreasing regulation, it is now important to act quickly and efficiently. The technology, such as wind and solar power plants, is available. The task now is to speed up implementation and expand the grids and storage options. 

Germany is facing the challenge of coping with rising electricity demand while electricity prices are currently rising dramatically. Due to increasing electrification in the transport and heating sectors, electricity demand will continue to grow in the coming years: from around 560 terawatt hours (TWh) in 2021 to 750 TWh by 2030.⁴ To make the energy transition a success, 80 percent of electricity consumption must be covered by renewable energies by then. This requires not only a reduction in CO₂ emissions, but also a stable and reliable energy supply—one that is economically viable and accepted by the population. The focus here is on both energy generation and energy distribution. To achieve this, technical solutions for CO₂-neutral power generation, efficient grids to transmit the electricity generated and reliable storage technologies must be developed. For example, the German Federal Network Agency's (Bundesnetzagentur) Electricity Network Development Plan (Netzentwicklungsplan Strom) 2023-2037/2045 includes funds for 4,800 kilometers of new lines and around 2,500 kilometers for the reinforcement of existing connections.⁵ Financing is secured via grid fees, for example. However, the financial resources cannot be invested quickly.

Standardize products, increase efficiency

Energy technology companies are facing the challenge of drastically increasing their output. In order to be able to invest more quickly in renewable energies, companies in the energy sector must industrialize their processes to a greater extent. A central problem here is the lack of standardization of their products. Until now, companies have often worked exclusively on a project-driven basis according to individual specifications from suppliers and operators—without standardized product catalogs and without close coordination with the operators. This leads to inefficient and lengthy processes and makes it more difficult to implement the energy transition. Example SuedLink: The construction of this 700-kilometer power line from Northern to Southern Germany was originally scheduled for completion in 2022. Commissioning is currently planned for 2028.⁶ Such large-scale projects show that the current speed is not sufficient to achieve the ambitious goals of the energy transition. This is where industrialization comes in. Standardization makes it possible to develop and produce products more efficiently. However, this is only possible if hardware manufacturers and operators work closely together. The collaborative approach helps to better coordinate supply and demand and offers greater scalability. 

The high degree of individuality and different technical requirements, such as grid connection conditions, lead to considerable delays. Operators and suppliers often award "turnkey" projects where the supplier is responsible for the entire implementation. This leads to "uncontrolled growth" in the technical landscape. One possible solution would be the unification, standardization and productization of processes and components. This would not only increase efficiency, but also significantly shorten delivery times. If an operator currently orders a transformer from a manufacturer, delivery can take more than three years. Delivery times of less than twelve months are possible thanks to productization. An example from the field of forming technology shows that considerable efficiency increases are possible as a result. For example, the production of industrial presses from the manufacturer Schuler was significantly accelerated. This illustrates the potential that industrialization holds. Initial examples in the energy sector indicate that a similar acceleration is also possible here. A tenfold increase in output would solve the speed problem of the energy transition—a mammoth task, but it is feasible.

Conclusion

The energy transition comes with many conditions: It will only succeed if the available money is invested quickly. The necessary speed can be achieved through the industrialization of the energy sector. The prerequisite for industrialization is productization, which requires closer cooperation between hardware manufacturers and operators.