In 2004, Germany had installed electricity generating capacity of 118.9 gigawatts. Also in 2004, Germany produced 566.9 billion kilowatthours (Bkwh) and consumed 524.6 Bwkh of electric power. The largest share of this production (61 percent) came from conventional thermal sources, followed by nuclear (28 percent), and other renewables (7 percent). Germany has an active electricity trade with neighboring countries, though it is usually a net exporter: during the first six months of 2006, Germany’s electricity grid industry association reported that the country exported 34.5 Bkwh of electric power while importing 22.4 Bkwh.

Germany liberalized its electricity sector in 1998, per EU requirements, with the passage of the Energy Industry Act. Unlike other EU countries, Germany did not immediately establish a regulatory agency, rather relying on negotiated agreements between sector actors. There was general dissatisfaction with this arrangement, with the European Commission threatening to bring legal action against Germany. In response, Germany enacted a new energy law in July 2005 that vested regulatory oversight of the industry with the newly created Bundesnetzagentur (BNA), which also gained regulatory authority over the gas sector (see Natural Gas section for more information).

The new energy law also requires the creation of a set tariff schedule for network access, rather than the rates currently negotiated on a bilateral basis between suppliers and distributors. Germany’s competition office and BNA have stated that they will break existing, long-term contracts and enforce third-party access to the national grid. The government hopes that these new measures will reduce German electricity rates, which are some of the highest in the EU.

Four companies control the largest share of Germany’s electricity generation, the result of consolidation over the past several years: RWE/VEW; E.ON, Energie Baden-Wuerttemburg (EnBW), and Sweden-based Vattenfall. These four companies also operate Germany’s national transmission grid, as there is no unified operator for the entire country. Finally, there are numerous local distribution companies, many owned by state or municipal governments, which actually sell electricity to end users, though these companies often also own a small amount of generating capacity. Under the new German energy law, state governments, not BNA, have regulatory oversight of these smaller operators.

Coal is the most important contributor to Germany’s conventional thermal electricity generation. According to the International Energy Agency (IEA), generation capacity fired by brown coal represented 42 percent of Germany’s conventional thermal capacity in 2004, with hard coal contributing 37 percent. Despite the environmental concerns surrounding coal-fired generating capacity and Germany’s need to meet its obligations under the Kyoto Protocol, the abundance of domestic coal reserves should result in coal remaining as Germany’s most prominent electricity fuel source for the foreseeable future. However, natural gas generation has increased significantly in recent years. Since 1991, the share of conventional thermal electricity generation supplied by natural gas has increased from 7 percent to 16 percent, according to the IEA. The increase in natural gas has mostly come at the expense of oil-fired capacity.

Germany’s power market liberalization has begun to attract more foreign investors to the generation sector. Steag and Austria’s EVN plan to build the 700-megawatt (MW) Walsum 10 coal-fired power plant, with operations scheduled to begin in 2010. Norway’s Statkraft announced an agreement with Germany’s Mark-E to build a gas-fired power plant in Herdecke, with a capacity of 400 MW. Netherlands-based Essent has begun talks with German power companies about building a new gas-fired power plant in Germany.

In 2004, Germany was the fourth largest generator of nuclear power in the world, following the United States, France, and Japan. Germany currently has 17 operating nuclear power plants and two plants currently shut down (see below). All four of the major generating companies operate some nuclear capacity: E.ON holds stakes in twelve plants, while nuclear power represents about 20 percent of the generating capacity operated by RWE and 40 percent of the capacity operated by EnBW.

Nuclear power has long been controversial in Germany, with the Green Party calling for the closure of all plants in the country. With the Greens joining the governing coalition in 1998, the phasing-out of nuclear power in the country became possible. In June 2001, the German government passed legislation and signed agreements with the industry calling for the closing of all nuclear power stations in the country by 2022. Per the closure schedule, Germany shut down the Stade plant in November 2003 and the Obrighein plant in May 2005. In addition, it plans to close the Biblis and Neckerwestheim plants by 2009.

According to Germany’s Renewable Energy Sources Act, the country aims to increase the share of electric power sourced from renewables to 12.5 percent by 2010 and 20 percent by 2020. According to the IEA, Germany had 708 MW of installed solar photovoltaic capacity and 16,629 MW of installed wind capacity in 2004, or 43 and 41 percent, respectively, of the total capacity installed in the OECD.