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A pathway to green growth? Macroeconomic impacts of power grid infrastructure investments in Germany

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  • Schreiner, Lena
  • Madlener, Reinhard

Abstract

As part of the sustainable energy transition in Germany, substantial investments in power grid infrastructure are planned. They are intended to provide flexibility to an electricity system increasingly relying on variable renewable energy sources, and on European interconnection. While much research has been done on the benefits of renewables, the economic impact of the necessary grid investments so far remains widely unclear. This paper presents a macroeconomic assessment of the planned investments in power grid infrastructure in Germany. By performing a static input-output analysis, the investigation reveals how multiplier effects of the grid investments impact macroeconomic outcomes – in terms of output, value added, employment and fiscal income. Net multiplier effects on outputs are found to be positive, ranging between €47.3 bn and €55.8 bn, while other effects turn out to be negative. A net decrease in value added of between €10.1 bn and €12.7 bn, in fiscal income between €962 million and €1354 million, and reductions in employment of between 130,170 and 158,940 jobs are found to be attributable to the grid investments. Hence, from a national perspective, the planned investments are found to have mixed macroeconomic effects and are not necessarily 100% 'no-regret'. Flexibility investments for the energy transition provided by power grids should therefore be realized with caution, and at least cost, if negative effects on national value added, tax revenues and employment are to be minimized. For policy guidance, more research is needed on the relative merits of the flexibility options available for accomodating high shares of renewables, and on the overall economic net benefits of sustainable energy transitions.

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  • Schreiner, Lena & Madlener, Reinhard, 2021. "A pathway to green growth? Macroeconomic impacts of power grid infrastructure investments in Germany," Energy Policy, Elsevier, vol. 156(C).
    • Handle: RePEc:eee:enepol:v:156:y:2021:i:c:s0301421521001580
    DOI: 10.1016/j.enpol.2021.112289
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    Cited by:

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    3. Ning Ren & Xiufan Zhang & Decheng Fan, 2022. "Influencing Factors and Realization Path of Power Decarbonization—Based on Panel Data Analysis of 30 Provinces in China from 2011 to 2019," IJERPH, MDPI, vol. 19(23), pages 1-24, November.
    4. Huang, Ruting & Yao, Xin, 2023. "The role of power transmission infrastructure in income inequality: Fresh evidence from China," Energy Policy, Elsevier, vol. 177(C).
    5. Zhang, Shuo & Yu, Yadong & Kharrazi, Ali & Ma, Tieju, 2023. "How would sustainable transformations in the electricity sector of megacities impact employment levels? A case study of Beijing," Energy, Elsevier, vol. 270(C).
    6. Pichler, Anton & del Rio-Chanona, R. Maria & Farmer, J. Doyne & Ives, Matthew & Bücker, Joris, 2023. "Employment dynamics in a rapid decarbonization of the power sector," INET Oxford Working Papers 2023-28, Institute for New Economic Thinking at the Oxford Martin School, University of Oxford.

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    More about this item

    Keywords

    Input-output analysis; Infrastructure investment; Electricity grid; Sustainable energy transition; High shares of renewables; Germany;
    All these keywords.

    JEL classification:

    • D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • R15 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Econometric and Input-Output Models; Other Methods

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