A new study by Umweltinstitut München e.V. with Hochschule Niederrhein’s Institute of Energy Technology and Energy Management has recently been published on market-oriented and cost-effective energy savings potential in German industry. The report was written by Jörg Meyer, Louisa Zaubitzer, Frank Alsmeyer, Andreas Seeliger and Lisa Schmitt. Below is a summary of the report.
Economic and business assessment of energy efficiency in industry
Energy efficiency makes an important contribution to securing Germany’s position as an industrial location: by implementing cost-effective final energy saving measures (i.e. measures with a positive net present value), 263 TWh/a of the 635 TWh/a final energy demand of German industry (as of 2023), i.e. around 40%, can be saved. 209 TWhth /a in the heating sector, 54 TWhel /a in electricity applications.
A large proportion of the cost-effective final energy saving measures are even “market- oriented measures”, i.e. they have payback periods of less than 3 years. The associated savings are around 28% (176 TWh/a), divided into 134 TWhth/a in the heating sector and 42 TWhel /a for electricity applications outside the heating sector.
The cost-effective final energy savings from all measures would result in cost savings of around €29 billion per annum in 2025. The necessary investment is estimated at a total of €104 billion, resulting in an average payback period of 3.6 years. Cumulatively over the next 20 years, the total savings for the investment path described in the study amount to approximately €250 billion. Added to this are the economic benefits: energy efficiency measures not only reduce demand, but also peak loads. If by 2045, 10 GW less gas-fired power plants need to be built, the investment requirement would be reduced by around €10 billion. Added to this are the avoided natural gas import costs of the power plants that were not built, amounting to around €1 billion per year, resulting in a cumulative economic benefit of €30 billion over 20 years for gas-fired power plants alone.
Energy efficiency measures also contribute to security of supply by reducing the need to import fossil fuels. A further contribution is the support for Germany in meeting itsinternational commitments and thus, where applicable, avoiding specific penalties for thefederal government or taxpayers. Other positive external effects include: more jobs in Germany, an increase in the value of capital stock, an increase in overall economic productivity and an acceleration of technological progress. Investments in energy efficiency shift capital flows away from abroad (e.g. for the extraction and transport of natural gas) and towards domestic investments in Germany.
Typical energy-saving measures include insulation and, above all, waste heat utilisation. Other measures are improved user behaviour, optimised control, operating and maintenance measures, drives with speed control, highly efficient motors and the usage of free cooling. The renewal of systems was also taken into account, as was the use of environmental heat. The switch to heat pumps is an important measure, particularly in the heat range up to 200°C. The total savings achieved through the electrification of processes in heat applications account for around 20% of the savings.
Potentials for individual companies and industries are of course different. However, even industries with lower absolute final energy requirements, such as the food industry (47 TWh/a), show similar results in percentage terms. The measures are only slightly different (e.g. no savings in the high-temperature range, more heat pump measures).
The “energy-intensive industry” accounts for 81% (514 TWh/a) of the final energy demand of German industry, so the results are very comparable to those when considering the industry as a whole. In the case of any concessions for energy-intensive industries, the definition should be standardised and adjusted so that thresholds are individually adjusted in line with proven final energy savings. Although many companies are aware of the measures, there are obstacles to implementing them. In addition to liquidity constraints, these include, at the operational level, a lack of personnel capacity and the desire for short payback periods, rather than a decision based on a net present value analysis.
Furthermore, investments in energy efficiency are hampered by additional obstacles that lie outside the influence of individual companies or even the entire industry. The political regulatory framework is a particularly important factor here. Another obstacle may lie in ownership structures.
Government intervention should generally be viewed critically, as it usually restricts the efficiency of functioning markets. Since there is clearly a market failure on the market for energy efficiency, i.e. an efficient market outcome has not yet been achieved, there should be an open discussion about how additional government support could promote energy efficiency. Various instruments and levels of intervention are possible.
An analysis of subsidies in the energy sector yields the following results (2026 planning): 13 of the 20 largest financial aid packages, totalling €42 billion, are allocated to the energy sector (over 70%), while tax reliefs still account for €7.7 billion (over 40%). An obvious suggestion would be to scrap the reliefs and subsidies on energy costs and distribute the freed-up funds to energy efficiency promotion measures. This would have the advantage of not requiring any additional federal funds.
The link to the English version of the report is available here.
Energy in Demand - Sustainable Energy - Rod Janssen 