German Chemical Industry Power Demand Could Resume Fall

Why It Matters

The decline threatens Germany’s position as Europe’s chemical hub, raises energy‑policy stakes, and could accelerate off‑shoring to regions with cheaper power and looser carbon costs.

Key Takeaways

• Power use fell 20% since 2014‑18, 42.8 TWh in 2024.
• Chemical output down 3.3% YoY, 21% below 2021.
• 9% of European capacity closed; 25% of German plants shuttered since 2022.
• EU ETS costs ten times higher than China, hurting competitiveness.
• Structural reforms needed: cheaper power, grid expansion, renewables integration.

Pulse Analysis

The German chemical sector, once a cornerstone of Europe’s industrial might, is now grappling with a steep contraction in electricity demand. While the 42.79 TWh consumed in 2024 still represents a sizable share of national power use, the 20% drop from the 2014‑18 baseline reflects a broader slowdown in output and a wave of plant closures. Analysts link this trend to a perfect storm of overcapacity, high energy prices, and a cumbersome regulatory environment that hampers long‑term investment decisions. The situation is amplified by the EU’s emissions‑trading system, which imposes costs roughly ten times higher than those faced by Chinese peers, eroding the cost‑competitiveness of German producers.

Policy makers face a delicate balancing act. Short‑term subsidies, such as the industry power price that caps electricity at €50/MWh ($55/MWh) for 2026‑28, provide temporary relief but do not address the structural bottlenecks. Industry voices, including BASF, call for a coordinated expansion of renewable generation and grid capacity, alongside a fundamental reform of the ETS to level the playing field. Without faster grid connections—currently taking five to ten years—and a more predictable power pricing regime, large‑scale electrification of processes remains uneconomic, limiting the sector’s ability to meet climate targets while staying globally competitive.

Looking ahead, the Chemistry4Climate study projects that, under a climate‑neutral scenario, chemical power consumption could rise to 160‑440 TWh by 2045, driven by hydrogen imports and electrified processes. However, this upside hinges on decisive reforms now. A failure to lower systemic power costs and synchronize renewable output with grid reliability could lock the industry into a prolonged decline, prompting further off‑shoring to regions like China, where a €8.7 bn ($9.5 bn) BASF investment signals confidence in growth opportunities. The next few years will determine whether Germany can reinvent its chemical base or watch it erode further.