State of the Energy Transition in Germany: Annual Review 2025

Germany’s greenhouse gas emissions in 2025 amounted to around 640 million tonnes of carbon dioxide equivalent (t CO₂-eq), falling only slightly compared with 2024 by 1.5 percent. Although the emissions budget of 662 million t CO₂-eq stipulated in the Climate Protection Act was met, savings dropped to less than half compared with 2024. Despite a weak wind year, the energy sector reduced its emissions by 1.5 percent. In the building sector, by contrast, emissions increased by 3.2 percent due to cooler temperatures, while in the transport sector they rose slightly by 1.4 percent as a result of higher fuel sales. Industry emissions fell significantly, mainly as a result of declining production of energy-intensive products.

Geopolitical uncertainties and weak investment activity shaped economic developments in Germany in 2025. While the services sectors grew moderately, the manufacturing production index fell by a further roughly 2 percent. However, world markets for climate-neutral technologies offer growth opportunities: in recent years, capital inflows into this sector have grown by an average of almost 10 percent. In the relevant industries, Germany holds a 13 percent share of world trade, which is higher than its overall share of global trade of 7 percent.

On average, the wholesale electricity price rose by 13 percent compared with 2024. The main drivers were higher natural gas prices and increased gas-fired power generation due to weak winds at the beginning of the year. Strong photovoltaic (PV) expansion in recent years had a price-dampening effect, especially in the summer half-year. For energy-intensive industry, the electricity price remained stable compared with 2024 but, due to structurally higher gas prices, stayed above pre-2022 levels. Household electricity prices fell slightly by 0.6 cents per kilowatt hour (kWh) as long-term procurement contracts from the expensive years 2022 and 2023 expired.

The expansion of solar installations, at 17.5 GW, remained at the 2024 level. Net additions increased to 4.5 gigawatts (GW) of onshore wind capacity but still remained below the expansion target. However, competition in the auctions and another strong increase in permits to 17.9 GW laid the foundations for strong wind power expansion in the coming years. By contrast, offshore wind developed weakly, with hardly any expansion progress and two unsuccessful bidding rounds signalling an urgent need for reform. Significant price spreads in the power market and falling battery costs led to booming grid connection requests for battery storage.

Renewable power generation rose by around 2 percent, covering 55.3 percent of electricity demand in 2025. The main drivers were strong photovoltaic expansion and above-average solar irradiation, which compensated for weather-related declines in wind and hydropower, reducing net imports. At the same time, cool weather led to a slight increase in gas-fired power generation in industrial combined heat and power plants. Nevertheless, solar energy moved up to second place in power generation and, for the first time, overtook gas and lignite. Onshore wind energy still supplied the most electricity overall.

Distribution grids moved into focus due to long waiting times for grid connections, a slow smart meter rollout and insufficient expansion speed. By contrast, progress was made in planning, permitting and line construction in the transmission grid. In addition, initial sections of the core hydrogen network were completed. Almost 40 percent of large municipalities completed their heat planning, with an increasing number of smaller municipalities also initiating planning. In the transport sector, new programmes were launched to expand charging infrastructure, particularly for trucks.

In industry, the decline in production continued, especially in export-oriented sectors such as chemicals and mechanical engineering. On export markets, geopolitical and trade policy conflicts, euro appreciation and global overcapacities dampened demand. Domestic factors, such as high energy costs due to dependence on fossil energy imports and deficits in digitalisation and infrastructure expansion, also weighed on competitiveness. Falling investment (-0.9 percent) hindered both economic recovery and the shift to climate-neutral production. An unfavourable electricity-to-gas price ratio, uncertainty over grid connections and over the carbon price path slowed electrification.

Structural changes in the buildings sector became visible in 2025. With around 300,000 heat pumps sold, their share of heating system sales, at just under 50 percent, surpassed gas boilers for the first time. The electricity-to-gas price ratio fell in 2025 to 3.3, only slightly above the threshold of 3:1 at which heat pumps are cheaper to operate than gas boilers in most buildings. Only a ratio of 2.5:1 would ensure a cost advantage even in less insulated buildings, allowing the higher upfront investment to amortise. Heat pumps became the standard in new residential construction, but the existing housing stock continued to rely mainly on fossil heating systems. Despite accounting for less than 5 percent of installed heating systems, heat pumps saved 3.4 million t CO₂-eq.

Greenhouse gas emissions in the transport sector increased slightly by 1.4 percent compared with 2024 because of rising fuel sales. On the other hand, falling prices and a broader model range for electric vehicles (EVs) boosted new registrations. The market share of EVs rose to just under 20 percent. Nevertheless, the pace of electrification remained too slow to achieve the necessary climate policy progress, in part because EVs are still often more expensive than combustion-engine vehicles. Ongoing debates about technology neutrality and a weakening of fleet limits further slowed the momentum of electrification.

Following Germany’s change in political administration in 2025, new energy and climate policy decisions at the federal level were largely absent. An energy transition monitoring report commissioned by the Ministry for Economic Affairs confirmed that the transition is broadly on track but also identified areas where further action is needed. Despite federal government announcements, key energy policy decisions and central legislative processes – such as the amendment of the Renewable Energy Act (Erneuerbare-Energien-Gesetz, EEG) and the revision of the Buildings Energy Act (Gebäudeenergiegesetz, GEG) – made hardly any progress. In 2026, these uncertainties must be resolved swiftly. To this end, the German Federal Government must provide clarity on key framework conditions in order to secure attractive electricity prices for industry and households, a targeted subsidy framework for heat pumps and electric vehicles, and a reliable carbon price path.