The German term Energiewende (energy transition) refers to a fundamental transition to a decarbonized energy system mainly based on variable renewable energy (wind, solar), with the emphasis on increased energy efficiency without the use of nuclear energy. The main focus is currently on the electricity sector and challenges relate to the support scheme, system adaptation, energy efficiency and electricity market design.

The Energiewende has an effect on the EU as Germany is part of the European electricity system, which is planned to be fully integrated by 2014, with interconnectivity between regional networks increasing over time. EU energy and climate policy developments are also of relevance to Germany.

The rising shares of variable renewable energy raise the flexibility requirements of the energy system to ensure network reliability. The extension of the electricity grid is a key factor as better cross-regional integration evens out the variability and provides greater access to dispatchable capacities and energy storage, for example.

Nuclear energy is at odds with the flexibility requirement as it is the least flexible energy source. Large nuclear shares may ultimately limit the possible share of variable renewable energy, particularly if the sustainable biomass potential is lower than expected due to sustainability and competing usage issues.

The issue of support costs is less dramatic than the public discussion would suggest. Structural change will incur some costs, and financing will be needed to build up the necessary low carbon energy system. But the costs of unabated climate change would be much higher.