Germany is headed towards major political and economic changes. Right after Donald Trump was re-elected as the President of the United States, Germany’s chancellor announced a vote of confidence, leading to the collapse of the current coalition government. New elections will be held in early 2025, and a new government will come to power.
This, however, is not the only cause of political and economic uncertainty. Germany is already going through a recession. Industrial output has fallen for two years straight, with high energy costs, grid tariffs, and bureaucracy worsening the already declining economic situation. The shift to electric vehicles has also been exerting pressure upon the automotive industry, and if Trump’s restrictive trade policies make a comeback, Germany’s export-heavy economy might be hit by yet another blow.
What would be the impact of a prolonged economic stagnation on the German power system?
In a special issue, we explore what could happen to power prices and other indicators by modelling a ‘Recession Scenario’.
The results show that power prices could drop significantly. Compared to the THEMA Base scenario, the reduction could be as much as 40 percent by 2027. However, this will depend on key factors like gas and carbon prices. Lower prices could bring some relief for industries but might slow down renewable investments.
We also analysed the price effect for individual drivers to understand their relative importance and find that carbon prices remain the Joker in the game.
The full report is an exclusive add-on for our market outlook subscribers.
Please get in touch with us if you want to discuss the analysis.
