Introduction

To the United States, Germany is the most critical nation in Europe. Not only does Germany have the
largest economy in Europe, it is also the largest European trade and investment partner of the United
States[2]. Thus, it is in the best interests of the United States to analyze the driving forces in the German
economy. Energy use and energy security are two extremely important factors in ensuring a stable and
health German economy, especially since it relies very heavily on exports and industrial output. Industry
energy consumption has been found to be the leading sector in energy consumption, partly because
exports make up 51.8% of the GDP. Germany has been a leader in efficient energy use, and is only
showing increased energy use in the transportation sector. This is due to decreases in energy intensity,
which is caused by more efficient technologies in both industrial and residential locations. In 2011, an
aggressive package of laws was passed to decrease energy consumption and, more importantly, transition
from fossil and nuclear fuels into renewable energy production. The purpose of this report is to assess
these two main factors, and to provide an idea of the direction the country in terms of energy problems.

Demand for Energy

Germany is the fifth largest economy in the world, and the largest economy in Europe. In 2012, Germany
produced a GDP of $3.428 trillion through its population 81.89 million[1][2].

Figure 1. The graph above illustrates Germanys total final consumption of energy by
sector. Mtoe refers to million tons of oil equivalent. The total energy used per sector can
be determined by subtracting the peak of its shading from the bottom of that shading.
Sectors in the Other category include commercial, public service, agricultural, fishing,
and other non-specified sectors. SOURCE: International Energy Agency, . "Germany
2007 Review."Energy Policies of IEA Countries. International Energy Agency . Web. 19
Feb 2014.
<http://www.iea.org/publications/freepublications/publication/germany2007.pdf>.

As seen in figure 1 Industry makes up 32% of energy use while transportation and residential make up
24% each. The remaining 20% of energy use falls in the other category, most of which is commercial
energy use. Despite some peaks and valleys, the residential and other categories have remained relatively
consistent since 1973. Transportation has seen a steady slight increase while industry has seen a steady
slight decrease over the years.

Figure 2. The graphic above serves to compare two energy use measurements for three separate OECD
countries. The diamonds represent the kilotons oil equivalent per 100 people. The squares represent the
kilotons oil equivalent required to produce $10,000,000GDP. SOURCE: Papadakis, Maria. Country
Energy and Development Indicators ISAT 311, Blackboard. 18 Feb. 2014. Excel File.

The best way to analyze Germanys energy profile is to compare it to other countries. In figure
2 Germany is put into perspective side-by-side with the US and Norway, which have similar
economies but different energy usage. The diamonds on the graph represent energy use per
capita, which is simply the total amount of energy used by the nation divided by its population.
This gives a basic overview of how much energy the average person uses. The squares represent
how much energy is required to generate a certain amount of GDP. This serves as a good
indicator as to the structure of the economy, as well as the efficiency of the industrial sector. As
seen in the graph, Germany has the lowest energy use per capita out of the three countries.
While the US is by far the most energy intensive out of these countries, Norway takes the lead
in being the least energy intensive.
Germanys residential energy use can be quantified by looking at three main factors: population trends,
quality of life, and energy efficiency. According to the World Bank, Germanys population from 1975 to
1989 remained fairly constant, with small population drops and increases along the way[3]. From 1988 to
approximately 2003 Germany experienced population increases ranging from 0.9% to 0.1%, the largest
increases since the 1960s[3]. Since that time, the population has evened out and even started to decline by
approximately -0.2% in the last 4 years[3]. These population trends do not directly correlate with
residential energy use, except for during one period of time. From 1990 to approximately 1996, a
noticeable population increase and residential energy increase can be pinned on the reunification of
formerly communist Eastern Germany into the Federal Republic of Germany. GDP per person [in
Germany] has risen by a factor of 6 since 1950[2]. Even though this increase started to stall in the mid1990s, the GDP per person did not decrease too much[1]. Such a substantial increase in living standards
usually marks increased individual energy use. However, effective energy efficiency policy and
technology have helped subdue this expected increase. The increased efficiency in large electrical
appliances has had the most steady and profound effect on this. Space heating energy costs have also been
shown to decrease substantially since 1990[6]. The desire for energy efficient appliances is also
propagated by relatively high electricity costs. The effects of these factors can be seen in figure 2, in
which Germany has the smallest energy use per capita.

The reasons for an increasing use of energy use in the transportation sector can be explained most readily
by observing quality of life and energy efficiency. It is very important to note that car and truck
2

transportation makes up a larger chunk of the transportation sector than do air, train, and buses. As
mentioned earlier, the GDP per person increased steadily since the 1950s. This has a lot to do with
transportation using private vehicles. Even though German vehicles have made a substantial decrease in
fuel consumption, more and more Germans have also begun buying individual cars due to higher income.
This allows for longer and more frequent trips as compared to public transportation. Compared to the
United States, Germany uses public transportation up to 5 times as often [5]. Another reason for high
transportation energy usage is the need to move goods out of the country. Germany relies very heavily on
exports to fuel their economy. Therefore, goods must travel relatively large distances to reach sea or air
ports, where they must travel even more. Germanys reliance on exports will be explained further in the
following section.
Unlike other sectors, Germanys industrial operations have seen a measureable decrease in energy usage,
despite Germany being one of the top 10 industrial producing economies in the world. This decrease in
energy usage is highly a result of their improvements in energy efficiency, their shift to a service
economy, and their role as an exporter. Germany relies on the import of energy sources to meet their
demand, which will be covered in depth later. Therefore, to continue competitive industrial practices in a
country that has high energy costs requires very efficient processes. As shown in figure 2, Germany has
relatively low energy intensity, although it is not as low as Norway. It is interesting to note that 48% of
industrial electricity demand is in energy intensive industries [4]. While both the United States and
Germany are shifting to a service based economy, the ratio of manufacturing GDP to service GDP is
higher for Germany than for the United States. Despite this, Germany still has lower energy intensity
because of their efficient energy expenditure. The reason for high competition is Germanys export-based
economy, which must compete with cheap labor exporting countries. This is fueled by the fact that
relatively weak consumer [Germany] demand is a consistent feature. This caused exports to make up
51.8% of the total GDP in 2012[2].

When looking at future energy demand in Germany, it is important to note that population is not expected
to substantially increase or decrease within the next several years[3]. In 2011, Germany passed an
extremely ambitious energy reformation act called the Energy Package. This legislature aims for
renewable energy sources to supply 80% of electricity by 2050[7]. Also, they aim to reduce energy
consumption and increase energy efficiency, especially in residential housing, to meet this goal. The
decrease in demand is to be met with increase awareness and some regulation[7]. The laws emphasize the
need to keep electricity prices low so that industrial competition is still possible. By 2050, all of their
nuclear energy is to be removed. Traditional fossil fuel generation, which makes up 80% of total
electricity generation, is set to decrease to 20% by 2050[7]. To compensate for the lost energy production,
some high efficiency combined cycle gas and coal plants are to be built. Furthermore, most of the energy
is to be replaced with renewable energy. To allow for renewables to be commercially viable the
legislature will subsidize some of the cost as well as invest heavily in expanding and retrofitting the
electrical grid. The EEG differential cost is the subsidy paid to bring down the price of renewable energy
derived electricity, and the money spent for EEG differential costs has increase from 0.9 billion in 2000
to 13 billion in 2011[7]. Expansion of the electrical grid is set at approximately 1900 km of new
electrical lines[7]. Germany also mentions the importance of keeping close ties to its local and foreign
allies as energy imports will still be needed to meet a large portion of the energy usage in 2050[7].

Energy Production and Security

Germanys size, location and political power in Europe give it very high influence on the energy sector of
Europe and its own energy security, but they still rely on imports from other countries to meet a majority
of their energy demand. Although this is the case, Germany does still have a very secure energy sector
due to their steps toward a sustainable and constant energy supply. Their strong and efficient government
allows them to respond to emerging threats very effectively when compared to some of their neighboring
countries[8]. They have a very diverse selection of fuel, which does not leave them dependent on any one
particular energy source. They are the world leader in many different categories of renewable energy, and
are continuing to make changes to shift to more renewable sources. A potential threat to Germanys
energy security in the future could be an economic shock due to a drastic rise in oil and natural gas prices.
This would occur primarily because Germany is 96% and 86% reliant on the two resources, respectively.
This threat would be even greater in the winter months, since Germany uses about 3 times more natural
gas during this time due to their cold climate [8]. Even though Germany faces this possibility, it is not
likely a concern due to the yearly decrease in the demand for these two resources. This is contributed
from their steps toward a more efficient energy economy.

Germanys primary source of energy still comes from oil, making up about 35% of their total primary
energy consumption. In fact, Germany is one of the worlds largest oil refiners and consumers, having the
capacity of about 2.2 million barrels of crude oil per day. Having this kind of oil capabilities allows
Germany to not have an oil dependence on one country, greatly increasing their energy security. Also
contributing to their energy security is their variety in importing countries. They import oil from multiple
countries, thereby decreasing their dependence on any one source. Germanys oil imports by source are
shown in Figure 3 below. The majority of this oil is used for the countries transportation sector, although
the government is advocating to drastically increase the number of electric vehicles on the road in the
upcoming years. Doing so would most likely remove Germany from being the 5th largest consumer of oil
in the world. Germany is also a world leader in the use of natural gas [12]. The majority of this gas comes
from cross-border pipelines that are imported primarily from Russia. Their use of natural gas has slowly
decreased throughout the past 10 years due to improvements in their energy efficiency. Nuclear power is
also an abundant energy source in Germany, although it is a political issue regarding when the nuclear
technology should be stopped completely. Because of this, German nuclear power has been at a decline,
and is slowly attempting to shift to more renewable energy instead. As of now, the decline in nuclear
energy has led to an increased use in coal for electricity, which has led Germany to burn more coal than it
has in 25 years. About half of the coal being burned in German plants is lignite, or brown coal, while the
other is bituminous coal, which is of higher quality than lignite. The source of energy that Germany is the
most successful in worldwide is renewable energy. The percentage of electricity produced from
renewable resources has increased from 6.3% to about 25% in the last 15 years, with goals to further
increase that number drastically [8]. A large amount of the renewable energy comes from wind and solar
power. Geothermal and hydroelectric powers, as well as the use of biofuels also are some sources of
renewable energy.

About 4.7 quadrillion Btu is produced in Germany in a typical year. They consume over 13 quadrillion
Btu in a year which shows that they import the majority of their energy. Both natural gas and oil is
imported into Germany through border pipelines from countries such as Norway, Russia and Netherlands.
Russia is their mainly supplier of crude oil, natural gas and hard coal, which could potentially be a threat
to their energy security if problems were to ever arise with Russias supply.

German Oil Imports by Source ( in

thousand bbl/day)

Russia

474
742

Norway
United Kingdom

41

Libya

251

Nigeria
Other
285

336

Figure 3. The pie chart above shows the many sources that Germany imports oil from. Germany is the 5 th largest oil
consumer in the world, and imports oil through several large pipeline systems. SOURCE: "Germany." Marcon
International,
Inc. N.p.,
n.d.
Web.
16
Apr.
2014.
<http://www.marcon.com/print_index.cfm?SectionGroupsID=51&PageID=391>.

Energy Issues and Policies

The German government is currently implementing a long term policy to move more toward a sustainable
energy supply. The policy requires a 20% drop in carbon dioxide emissions before the year 2020 as well
as a large increase in the consumption of renewable energies. This policy has already resulted in a large
expansion of renewables, with wind power leading. Also, as a result of this, nuclear power is slowly
becoming less as renewable energy takes its place. Their current shift towards this more renewable
society is shown in Figure 3 below. The German government even plans to phase out all nuclear power
plants completely by the year 2022 due to controversy in nuclear energy [8]. This transition has the goal
of reducing Germanys energy security threats by limiting fossil fuel use, which would allow them to
produce the majority of their own power rather than import it. Even though this policy is improving the
renewable sector, it has negative impacts on the German economy. The consumers of Germany already
faced the highest energy prices, and the renewable energy has increased them further, taking a further toll
of the middle class. Very large subsidies for the renewable energy are harming the economy, imposing
large costs on lower class energy consumers [9]. This problem cause Germany to open up their first coal
fired power plant in 8 years to help stabilize the economy, showing that their economic problem had to be
solved at the expense of their national policy. These plants are likely to be replaced in the future by
natural gas plants, in order to meet the carbon emissions reductions target.

Figure 4. The above graphic shows Germanys current energy shift that consists of using more renewables, nuclear and
natural gas.They also have had a dramatic decrease in their coil and oil usage. SOURCE: "Germany Energy
Outlook." International Energy Agency. N.p., 2012. Web. >.

Conclusion
To the United States, Germany is the most critical nation in Europe. Not only does Germany have the
largest economy in Europe, it is also the largest European trade and investment partner of the United
States[2]. Thus, it is in the best interests of the United States to analyze the driving forces in the German
economy. Energy use and energy security are two extremely important factors in ensuring a stable and
health German economy, especially since it relies very heavily on exports and industrial output. Industry
energy consumption has been found to be the leading sector in energy consumption, partly because
exports make up 51.8% of the GDP. Germany has been a leader in efficient energy use, and is only
showing increased energy use in the transportation sector. This is due to decreases in energy intensity,
which is caused by more efficient technologies in both industrial and residential locations. In 2011, an
aggressive package of laws was passed to decrease energy consumption and, more importantly, transition
from fossil and nuclear fuels into renewable energy production. The purpose of this report is to assess
these two main factors, and to provide an idea of the direction the country in terms of energy problems.
Germany is, and will likely remain one of the United States closest allies. Therefore, it is important to
ensure Germany continues its energy security and continues to be a top global exporter. Although
industry makes up the majority of the energy consumption, it is slowly decreasing. The same is true for
residential and commercial energy usage, mostly due to new energy efficient technologies. Recently, the
government has instituted groups of laws to further drive this trend of efficiency and decreased
consumtion. The current government policies that Germany is implementing to decrease its energy
intensity shows that they are taking the correct course of action to limit their carbon emissions. This can
be proven by analyzing their yearly energy usage, and seeing the decline in the use of fossil fuels each
year. Much of this can be attributed to their very successful use of renewable resources. As their
renewables have increased over the years, the use of fossil fuels has declines drastically as a result. Their
continued focus on this could very well help them reach their goal of a 20% drop in carbon dioxide
emissions. Also, their diversified and flexible supply infrastructure, consisting of many cross border
pipelines for both oil and natural gas, allow them maintain high confidence in their ability to remain very
stable in regards to energy security. Germany is, and will continue to be a model country in terms of
energy efficiency due to their long-term sustainability goals, and current energy implications.
6

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