The findings in brief:
- Germany’s energy and digital infrastructure is essential to its success as a business location
- Weaknesses in the energy sector are driving companies overseas
- Companies want to invest more in their own energy supply
The energy transformation cannot succeed without efficient digital infrastructure.
The condition of Germany’s energy and digital infrastructure is jeopardizing its success as a business location
In an increasingly connected and technology-driven world, the importance of reliable and secure infrastructure is growing – both in our private lives and in the business sphere. The ongoing war in Ukraine shows all too clearly how supply security can be affected by one-sided energy dependencies and other geopolitical risks.
Cyber security is also gaining in relevance as a result. More than ever before, the energy and digital infrastructure is becoming a key factor in a location’s success and competitiveness. In this respect, Germany is faced with the considerable challenge of realizing the measures required for an effective and connected energy transition through a combination of private- and public-sector initiatives.
I believe the biggest challenge is to safeguard critical infrastructure against the threat of physical and cyber attacks.
Challenges and issues facing Germany’s infrastructure
As things stand, almost no companies are energy self-sufficient, i.e. capable of generating more electricity than they would need to purchase from external providers. Around a quarter of them currently generate electricity and/or heat for their own use. Although many have already realized savings in response to the gas crisis, companies remain ambitious when it comes to reducing their energy consumption.
On average, respondents are targeting a reduction of 23% over the next decade. To achieve this, nine out of ten companies intend to invest in their own energy supply in the medium term. They are not counting on the government to help: Although two-thirds of companies say the energy transition represents a good opportunity to become less dependent on energy imports, 78% of them believe this opportunity is being jeopardized by current economic policy measures. Their economic initiatives are primarily focused on improving energy efficiency, expanding in-house renewable energy generation, and purchasing energy from green sources.
Infrastructure as a key factor for success and competitiveness
Conversely, infrastructural weakness is also affecting the location decisions of companies headquartered in Germany. 23% of them say that they have already relocated capacities abroad in response to weaknesses in the energy sector, while a further 38% are currently considering doing so – an alarming scenario for the German economy. According to discussions with experts, these developments are driven in particular by a lack of cost transparency and economic policy uncertainty.
The important role of banks and other private investors
Companies plan to invest large amounts in the expansion of renewable energies and transmission grids in particular. 83% of them believe that banks and other private investors have an important role to play in this process, although some of their initiatives are still seen as having room for improvement.
The energy industry in particular is diversifying its financing structure in order to successfully manage the transformation. 59% of companies are already making use of infrastructure and project finance and 17% intend to do so in the future, while a further 7% have yet to find the right structure for their needs. Other forms of off-balance sheet financing are also set to become increasingly popular.
The focus is on transferring market price and liquidity risks to banks and other financial service providers as an alternative to exchange-traded derivatives (hedging).
More detailed information and expert assessments can be found in the study.
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