Column: Key energy and output data to track as Germany charts economic revival: Maguire

Key Energy Services

25/02/2025 06:00

(The opinions expressed here are those of the author, a market
analyst for Reuters.)
    By Gavin Maguire
       LITTLETON, Colorado, Feb 25 (Reuters) - Following rare
back-to-back economic contractions in 2023 and 2024, German
businesses are hopeful that a new government formed by the
conservative CDU/CSU party and the center-left Social Democrats
can revive Europe's largest economy in 2025.
    High energy costs, weak consumer demand, stiff competition
from China and a lack of supportive policy reform have all been 
blamed for the economic woes facing Germany in recent years, and
remain major challenges for the incoming government.
   Sunday's election results indicate that CDU/CSU may be able
to form a government with just one other party and avert a
repeat of the previous government's three-way coalition that
struggled to decisively alter Germany's policy landscape.  
    And incoming Chancellor Friedrich Merz has indicated that
coalition talks will begin immediately, with industrial growth
and job creation among his main priorities.     
    Below are key data points on Germany's power prices, energy
mix, industrial production and foreign trade that can be tracked
to gauge the impact of any policy changes under the new
government.  
    
    POWER PRICES
    German industry has cited high energy costs as a major
factor impeding growth in recent years, rendering German
products uncompetitive on the world stage. 
    After averaging around 40 euros ($41.84) per megawatt hour
(MWh) through 2020, German wholesale power prices jumped to an
average of 235 euros/MWh in 2022 as the onset of the
Russia-Ukraine war snarled natural gas flows to Europe.
    That surge in power costs hammered all major energy
consumers in Germany in 2022 and for most of the following year,
and resulted in a major contraction in gas use by industry. 
    Wholesale power prices retreated to an average of around 80
euros/MWh in 2024, but have climbed back above 120 euros/MWh so
far in 2025 due to rising regional natural gas prices, which
help set regional power costs. 
    Going forward, power prices will remain a critical gauge of
industrial health. 
    German power firms already plan to add more renewable energy
generation capacity in 2025, but new policy measures that
accelerate clean energy additions could help to boost overall
power supplies and potentially cap wholesale prices. 
    Continued high reliance on natural gas for power production,
however, means that Germany's influence over power prices will
likely remain beyond the reach of policymakers and power
producers.
    
    GAS FIX
    The share of natural gas within Germany's power generation
mix is another factor determining the outlook for the country.
    Germany relies on imports for over 95% of its gas supplies,
according to the Energy Institute, and used gas to generate
around 17% of its electricity in 2024, according to Ember.
    That gas generation share was the highest since 2020, and
indicates that Germany's power system has actually become
increasingly gas-reliant despite the cuts to pipeline supplies
from Russia since 2022.
    To replace the reduced Russian supplies, Germany has boosted
gas imports from the United States and other suppliers in the
form of liquefied natural gas (LNG), which can cost multiple
times more than gas supplied via pipeline.
    If German power producers and industry continue to rely on
gas for a substantial share of generation, government policies
that help lower the cost of imported gas could help spur greater
power consumption and output by industry. 
    But given restrictions on government debt in Germany, the
incoming government may struggle to pass measures to reduce the
gas cost burden for power firms without facing opposition from
parliament members who are against debt increases. 
    
    OUTPUT AND TRADE
    Due to a mix of high power costs as well as weak demand for
German-made industrial goods, German production of a slew of
energy-intensive products including steel, fertilizers and
chemicals has slumped in recent years. 
    German output of cars has also been hit by weak local
consumer demand as well as record exports of cars from China
that have served to undermine demand for Germany's vehicles.
    The incoming German chancellor campaigned on expanding the
country's industrial base, and has vowed to protect and grow
jobs in the sector.     
    But policies aimed at spurring demand for German industrial
goods require changes to taxes and spending levels, which again
may encounter parliamentary opposition from rival parties.
    Policymakers may also aim to boost Germany's exports, which
have flagged since 2022 amid weak global consumer demand and
stiff competition from other exporting nations. 
    But given the impending tariffs imposed by U.S. President
Donald Trump, as well as ongoing trade disputes between Europe
and China, the incoming German government may have only limited
scope to influence export flows over the near to medium term.   
    
The opinions expressed here are those of the author, a market
analyst for Reuters.

($1 = 0.9559 euros)

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Germany wholesale base power prices    https://tmsnrt.rs/3EUJVsH
Germany's electricity generation by source 2000-2024    https://tmsnrt.rs/3EPRu3E
Germany’s output of key industrial ingredients    https://tmsnrt.rs/3Qy35qU
Germany’s export revenues have struggled to grow since 2022    https://tmsnrt.rs/41sRqQn
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting By Gavin Maguire; Editing by Jamie Freed)
 ((gavin.maguire@thomsonreuters.com; +720 295 6101;))