A Pathway to Green Growth? Macroeconomic Impacts of Power Grid Infrastructure Investments in Germany

Abstract

As part of the sustainable energy transition in Germany, substantial investments into 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. The investments’ economic impacts remain widely unclear. Therefore, this paper contains a macroeconomic assessment of planned investments in power grid infrastructure in Germany, performing an input-output analysis, addressing the question, how multiplier effects of the investments impact macroeconomic outcomes, i.e. output, value added, employment and fiscal income. Net multiplier effects on outputs are found to be positive, between €47.3 bn and €55.8 bn, while other effects are found 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 €1,354 million and reductions in employment between 130,170 and 158,940 job positions are found to be caused by the investments. Hence, the planned power grid investments, at least from a national perspective, are found to have mixed macroeconomic effects. Flexibility investments for the energy transition provided by power grids should therefore be realized at least cost, if negative effects on national value added, tax revenues and employment are to be minimized.