Collapse in demand for natural gas in Germany in the coming decades

Demand for natural gas in Germany will decline drastically by 2050. Compared to 2021, demand is expected to fall by about one-third by 2030 (to about 650 TWh), by more than two-thirds by 2040 (to about 330 TWh) and by almost 95 percent by mid-century (to about 50 TWh). This is the result of the current study “Natural gas demand outlook to 2050”, which Deloitte has presented together with the Öko-Institut. The study is based on a data-driven and model-based analysis which assumes that the EU member states comply with their climate commitments. According to the study, natural gas is expected to account for only about one percent of primary energy supply in Germany in 2050, down from about a quarter in 2021. The modeling results show a similar development for the EU, with a 25 percent reduction in demand already by 2030.

Dr. Bernhard Lorentz, global consulting leader sustainability and climate at Deloitte emphasizes: “Declining global demand for natural gas is calling into question investment decisions for new natural gas production projects for the EU or the German market. There is a risk that these projects will fail due to development should global climate commitments be met. In addition, with the exception of Russia, Algeria and Norway, none of the top ten reserve and producing countries are within pipeline reach of Germany and the EU, while the LNG market is dominated by the US, Qatar and Australia. Against this background, new projects would only marginally diversify supply.”

Based on the scenario modeling of the Expert:in, demand for natural gas in Germany will decline in all sectors in the coming decades. According to this, almost half of the decline by 2030 will be in the building sector (households, as well as commercial, trade and services, including district heating), which uses energy efficiency and technologies such as thermal retrofits and heat pumps to replace fossil heating systems. This is projected to result in a one-third decrease in natural gas consumption to less than 300 TWh by 2030. By 2050, nearly 50 percent of useful heat in this scenario is generated by heat pumps, followed by solar thermal (about 25%), biomass, and electricity.

In the electricity sector, the use of renewables can replace fossil fuels, including natural gas, according to the forecasts. By 2030, more than 80 percent of electricity will come from renewable sources, up from 44 percent in 2022, which would meet Germany’s renewable energy expansion targets. From 2030, gas-fired generation plants can run on carbon-neutral hydrogen to reduce dependence on natural gas, provided the framework conditions are adjusted (e.g., through changes to standards regulating hydrogen blending). By 2050, the share of natural gas in net power generation thus drops to less than one percent.

In industry, decarbonization measures should gain momentum especially in the iron & steel, cement and chemical sectors from 2030 onwards, gradually replacing natural gas with electricity- and hydrogen-based solutions. In these traditionally energy-intensive sectors, natural gas has long played a central role in providing low-cost energy for industrial heat and as a feedstock (e.g., for chemicals). The study projects that natural gas heat generation in industry will decline by 20 percent by 2030 compared to 2018, and by another 60 percent by 2040 before falling to zero by 2050.

Dr. Felix Matthes, Research Coordinator Energy and Climate Policy at Öko-Institut: “In the event that policymakers support new natural gas production projects, our analysis suggests several crucial implications: Such investments would need to be accompanied by a clear and detailed concept of how these plants can later be transformed to support a country’s energy transition, e.g. towards green hydrogen and its derivatives. Another important component is the use of the best available technologies, as well as strict governance standards. Otherwise, the long-term financial and climate risks could outweigh the potential medium-term benefits. International support could also be designed to avoid lock-in effects. That is, it must avoid creating incentives that would prolong the use of natural gas in gas-producing and gas-consuming countries, even if cleaner alternatives were already sufficiently available. For example, governments could refrain from supporting business models based solely on long-term contracts that include contractual destination clauses.”

The calculations of the Deloitte study “Natural gas demand outlook to 2050” are in line with all major studies and recent forecasts for the energy system in Germany. These studies by various institutions include scenarios with different views on the use of technologies and the contributions of individual sectors to the energy transition. Moreover, most of them were published before the Russian attack on Ukraine, which is expected to accelerate the phase-out of natural gas supply. All of the scenarios examined for Germany show a drastic drop in natural gas demand from 2030 onward and an almost complete phase-out by 2050.

At the EU level, all scenarios consistent with the Paris Climate Agreement show a strong decrease in natural gas consumption by 2050. The development at the global level is estimated based on an analysis of 30 current energy system models. As a result, all scenarios in which global average temperature can be limited to below two degrees require limiting total natural gas consumption to below 1 million TWh between 2020 and 2050.