Energy Musings - January 29, 2026
More people are acknowledging the misguided energy policies of the past. We look at Germany's mea culpa after highlighting the latest NCEA report on the IEA's oil outlook.
Misguided Policies Create Energy Disaster
Tuesday morning, the National Center for Energy Analytics (we are a scholar) hosted a webinar to discuss its latest report, The Return of Realism in Global Oil Forecasts: A Critique of the International Energy Agency World Energy Outlook 2025. The report was authored by two associates, Neil Atkinson and long-time friend, Adam Sieminski. The discussion was moderated by NCEA co-founder Mark Mills and included a perspective on the issue from Rapidan Energy Group’s founder, Robert McNally.
The report and discussion focused on the International Energy Agency’s (EIA) World Oil Outlook 2025, which reintroduced the agency’s Current Policies Scenario (CPS) for projecting the oil market out to 2050. The CPS scenario, which projects future oil demand based on existing energy policies, was dropped from annual oil outlook reports for the previous five years.
We have previously written about the CPS, which shifts the IEA’s forecast away from its highly aspirational forecasts predicting a peak in global oil demand by 2030 and no need for oil and gas investment, to one that now sees oil demand growing for decades and forcing the global petroleum industry to immediately ramp up investment in finding and developing new oil resources to avoid a catastrophic rise in prices. The report and webinar video are posted on the NCEA’s website at energyanalytics.org. We urge readers to view the webinar and read the report.
The IEA’s shift away from aspirational views about the evolution of the global oil and energy markets may be significant. Still, it is not the first or last policy change or admission that current energy policies are failing the public and inflicting harm that could have been avoided with more sensible policies. We recently wrote about the Rhode Island governor’s fiscal 2026 budget proposal, which proposes many key green energy policy changes to ease the soaring cost of electricity for the state’s residents.
Perhaps the most significant recent admission of a poor energy policy with crippling consequences was German Chancellor Friedrich Merz’s statement that the government’s decision to shutter all its nuclear plants ahead of schedule was a “serious strategic mistake.” The government now plans on reactivating its nuclear fleet, although the effort faces enormous challenges.
Germany’s Energiewende (German for ‘energy turnaround’) has an uncertain starting date, because it was tied to the nation’s growing interest in climate change in the 1990s. Most people believe Energiewende became a government policy priority in the early 2000s after Angela Merkel was elected chancellor in 2005. Hailing from East Germany, she is the only female to hold the position. She followed Gerhard Schrőder, who worked to secure more Russian natural gas for Germany. Merkel furthered that effort by negotiating a reset between Europe and Russia and actively working to block Ukraine and Georgia from joining NATO. She initiated construction of the controversial Nord Stream 2 pipelines, which would bring Russian natural gas to Germany. In 2019, Merkel protected their construction from U.S. and European sanctions. She couldn’t prevent the pipelines from being blown up by terrorists.
In 2010, Merkel approved the shutdown of Germany’s nuclear power plants. She accelerated the timetable to 2022 following the 2011 Fukushima accident, by playing on Germans’ unease with nuclear energy. The final three nuclear plants were closed in April 2023.
The closings reflected abysmal timing, as just over a year earlier, Russia invaded Ukraine, and Europe retaliated by banning the use of Russian oil and gas. That was extremely unfortunate for Germany, given Merkel’s policies that boosted the country’s dependence on Russian fossil fuels. According to The Economist, in 2021, Russia supplied over half of Germany’s natural gas and coal and a third of its crude oil.
In his 2018 speech to the UN General Assembly, Germany’s delegation appeared to laugh during President Donald Trump’s warning that Germany was becoming “totally dependent” on Russian energy. It was an observation that haunts Germany’s politicians and their energy policies today.
Trump’s warning had little impact on Germany’s energy policy. The Energiewende strategy aimed to transition Germany to a renewables-based power system and, eventually, to a 100% renewable energy total primary energy mix. Electrifying everything was driving the plan.
Renewable energy’s share of Germany’s electricity has soared.
As the chart shows, Germany appears to have made significant progress toward its energy transition goal. Renewable energy’s share of electricity has soared. Unsurprisingly, the share of renewables in total electricity generation capacity has also soared.
Renewable power-generating capacity has grown significantly.
The 2025 breakdown of Germany’s electricity generation fuel sources shows renewables at over 57%. Hard coal and lignite account for nearly 21%, and natural gas contributes almost 17%. Within the renewables category, wind totals nearly 27%, solar almost 18%, biomass 8.4%, and hydro 3.5%. This mix, however, has made Germany more dependent on power imports. Additionally, its risk of power blackouts has also increased.
The shift to renewable energy has worked, but at what cost?
However, here is what has happened to Germany’s electricity production since 1990. After growing steadily from the early 1990s to 2017, electricity production has declined to a 2025 level that is 8% below the 1990 level and 22% below the 2017 peak.
Dispatchable electricity has been the loser in the push for renewable energy.
As a result of the rush to close Germany’s nuclear power plants and switch to renewable energy, the nation has shifted from a reliable power exporter to a major importer. That shift puts Germany at risk of power supply challenges when continent-wide weather events prevent neighboring countries from having significant surplus electricity available for export. Neighboring countries could also target the government over policy differences in Europe.
From an electricity exporter to a significant importer.
In his recent speech, Merz explained that Germany’s power industry is too heavily reliant on imports. In 2025, nearly 70% of the country’s energy needs (primary energy) were met through international imports. This dependence means Germany is subject to supply interruptions and higher prices, which are passed on to industry and consumers. The result is that Germans pay among the highest electricity prices in Europe and internationally. In the first half of 2025, Germany’s consumers spent an average of 38 euro cents ($0.45) per kilowatt-hour, the fourth-highest price worldwide. Germany trailed Bermuda, Denmark, and Ireland, among the 143 countries ranked. When purchasing power is taken into account, Germany’s ranking falls to 22nd, and it has the second-highest price among the most industrialized countries (G20) behind Italy.
Moreover, the high cost of energy has hobbled the nation’s industrial sector, contributing to stagnant economic growth. Germany’s GDP grew 0.2% last year, after shrinking for the prior two years. The government just reduced its 2026 and 2027 growth forecasts to 1% and 1.3%, respectively, from 1.3% and 1.4%, after citing that growth was picking up more slowly than anticipated. High energy costs?
In his description of Germany’s energy policy, Chancellor Merz said, the nation is now “undertaking the most expensive energy transition in the entire world.” He acknowledged that Germany’s carbon emissions have declined by 32% since 2000, but noted that it “simply doesn’t have enough energy-generation capacity.” Therefore, he announced that “power plants are to be built” and “all the necessary documents have been exchanged” to begin construction of new nuclear power plants, which will likely be located on the sites of old plants.
By shutting down and dismantling nuclear power plants, Merz noted the problem it has created for Germany. “If you are going to do it, you should at least have left the last remaining nuclear power plant in Germany on the grid three years ago, so that you at least have the electricity generation capacity that we had up until then,” the chancellor said. By implication, Merz is bemoaning the failure of renewable energy, with its intermittent nature and thereby low efficiency, to provide the power the German economy needs. The result of Energiewende has been escalating power costs that crush consumers, a significant dependence on external sources for energy imports, and a crippling of the nation’s economy. Correcting the misguided energy policy will take years and vast investments.