Good afternoon, ladies and gentlemen. It's truly a privilege to share my thoughts on the German energy transition with this august group, but most importantly, to also learn from your perspective, is decarbonizing Germany a pragmatic path to the future or is it a costly experiment? Ultimately, what will it take to eliminate about 700 million tons per annum of CO2 emissions from Germany? And in the end, is it going to be worth it? It's a difficult question to answer, but I think we can all agree a very important one and more so now than ever.
Germany has been at the forefront of the energy transition in the last 20 years. Thanks to the energy vendor, its overall success is debatable and I'm not here to argue a position one way or the other. Regardless of our position though, one thing, we all have to agree that the progress that Germany has made in the electricity generation sector is quite remarkable and data speaks for itself. Today, less than 50% of the German electricity comes from fossil fuels and even within the fossil fuels, the natural gas, a low emission source has gained share over Lignite and hard coal. Wind, and solar in a good year can now contribute as much as 37% to the total electricity supply.
Not surprisingly, as a result in Germany, we have achieved remarkable reduction in emissions between 1990 and 2022, we have reduced our absolute emissions by almost 32% and in the same time period our GDP has grown by almost 50% and the population has grown by about 5%. This means that our progress on per capita emission basis and an overall energy intensity basis is even more impressive than the absolute emission reduction. And as you can see on the graph that shows both production and consumption-based emissions, that the emissions have not only been reduced by outsourcing production because this is often an argument used against Energy vendors. But this has been a genuine shift and genuine reduction in our own domestic emissions. I must confess, this is perhaps the only good news in my keynote today.
The progress beyond power generation has been very limited. Coal, Oil and Natural Gas, they dominate the energy mix. Even today, almost 80% of the total energy supply in Germany comes from fossil sources. Perhaps the only silver lining is that the overall energy consumption has reduced, but the energy mix in general has remained constant. Earlier I showed you the 32% overall reduction in CO two emissions since 1990. If you break it down, we can see that the bulk of the emissions reduction has come from electricity, almost 45%. The rest of the sectors have made minimal contribution to the emission reduction if at all, no matter what sector we choose. Right now, the CO2 abatement cost in all non-electricity sectors remain astronomically high. I'm talking about upwards of $250 to $300 per ton of CO2 abatement. If you look at this chart, we can all agree that even for Germany, the energy transition has just begun and all is not well even in the power sector.
I know I warn you, not much good news here as we continue to decarbonize the power sector. A further important concern arises with respect to the dispatchable power. The energy system in Germany or any other country for that matter, were designed in the past to solve the peak load problem with renewable. However, we have to design the systems to be resilient in the low supply scenario. It's not a very good-looking chart, but it conveys an important message. It shows us that between 2022 and 2030, we plan to remove dispatchable power from our energy system without clear plans to reduce it. And that perhaps was at the heart of what Chris Linder was referring to.
Almost 40 gigawatt of nuclear and lignite will leave the system, and even in the best case, no more than 15 gigawatt of replacement is planned in the system. To throw more color on it, we are talking about batteries, Hydrogen, you can all agree that technologies that still have to prove themselves at scale. Without urgent market design changes from the government, this problem is unlikely to be solved. And why does it matter? Well, first and foremost, we have to make the energy system resilient even when the renewables are not producing. In addition, even outside the extreme cases of the blackout, lack of dispatchable power will cause high price volatility. This chart shows globally that the markets that do not have major volatility limiting features, they see large intraday price swings. My favorite example is the Aircot versus kaiso. Within the US market itself, Aircot has only wholesale market. There are no capacity markets versus Kaiso has resilience, payments, capacity markets, and of course a thriving wholesale market. And what you see here is that as the renewable penetration has increased in Aircot, which is quite significant now the intraday price volatility is actually quite high compared to Kaiso where it is still quite limited.
As I mentioned, the volatility reducing features becomes especially important as the renewable penetration increases, which is already, but will now soon increasingly be the case for Germany capacity markets, double-sided CFDs, higher demand responsiveness. These are all factors that have to be built in to reduce price volatility. Even if we have the perfect market designs and clear targets. Then there is this minor issue of the real-world execution. Different estimates put different costs to the energy transition, but this can be anywhere between 600 to 800 billion until the end of the decade. And the increase in capacity across all renewable technologies is between two and four times. And for more nascent technologies like hydrogen or EV, then trees can be up to 10 to 15 times. I'll not go through all the numbers here, but the short version is that no matter which metric you look at, the road ahead is steep. And then of course there's this lingering question about the investments in transmission and distribution grids. Christian, you also mentioned that thankfully in Germany the grid congestion issues are not as severe as in some other countries, but in spite of that, several hundreds of billions must be invested in the short time ahead of us.
And this naturally brings us to the question is there sufficient capital? A couple of months ago, I was in a similar setting where there were two camps when it came to capital availability. One group argued there's not enough capital available, and the other group argued there are not enough good projects available. It's a fact that renewables are an overall low IRR business and therefore as screws are tightening, a lot of capital is leaving the market. For instance, the oil and gas companies last year made a gigantic total profit of around $4 trillion. This is two to three times higher than any record profit year in the history of the oil and gas industry. But a lot of this capital is not being invested into the energy transition. It's hard to read on this graph, but there is a thin green line which shows that 1% of the total earnings is going back into low carbon investment. Most of the profits are being returned to the shareholders as a one-time, oil and gas man, myself, I can sympathize with these oil companies who must return 15 to 20% to their shareholders. This, however, is no consolation for the lack of capital in the energy transition.
The problem is further compounded by the current interest rate situation. Even for companies like RWE that are committed to the energy transition, accepting lower IRR work spreads, the current interest rates are sucking all the oxygen out of our balance sheets. Offshore industry is hit by a wave of project cancellations as there is growing mismatch between costs and revenues. Growth for renewable companies is either not priced at all or in worst cases, even negatively priced by the market in their stock price. On this slide, you can see how the interest rate hike is the single biggest factor behind the share price decline of the renewable stocks. And here you see the effect is even clearer. Investors are penalizing the companies in direct proportion to their exposure to renewables. As I said, growth pipelines are in some cases negatively priced and therefore it's no surprise that every morning we are waking up to the project cancellation news or the oil and gas companies pivoting away from the renewable transition completely. In contrast, if you look at the share price of oil and gas companies, they are at all time highs. Quite clearly transition risk is not priced in those shares. I cannot help but wonder if the so-called ESG investors are really putting their money where their mouth is.
No discussion of the energy transition can of course be complete without a reference to supply chains. And therefore, even if we are able to find the money, somehow the challenges of the supply chain still remain. There's been a talk of domesticating the critical supply chains in Europe, but in my opinion, we have to admit that that is not going to be an easy task. Definitely not in the short run. Currently, China dominates all renewable supply chains and as much as we would like to diversify away from China, the reality is that it's not possible, at least till the end of the decade,
80% of all manufacturing capacities related to renewables is in China. In the mid time, perhaps some of it might migrate to the US on the bank of IRA, but I don't see how Europe will gain any competitive advantage between US and China in order to domesticate the supply chains. Even if there's a political will to domesticate the supply chain, it'll still be very difficult and will add a lot of investment burden. On the left graph, you see the factory CapEx required to meet Europe's local demand by 2030 across different technologies. And ultimately, regardless of whether we can find the money or not economically, it's not a wise decision. China and Southeast Asia are by far the most competitive regions for manufacturing, and that advantage cannot be turned overnight, especially if you combine it with the need for higher returns. In order to attract more capital into the energy transition, this problem becomes more compounded. In short, my conclusion is there is no transition without China.
Coming to my last slide, I began by posing a question. Is German energy transition a pragmatic path to a sustainable future or is it a costly experiment? I believe in spite of all the challenges, German energy transition is the only pragmatic way forward, not just for sustainability, but also for security of supply reasons. It is costly in the short run, but I believe in the long run it has a high chance of success. If the governments, businesses and investors are willing to take bold steps. Government must work on making the permitting faster, create clearer incentives and line of sight to revenues through instruments such as double-sided CFTs, but also rethink the entire market design. Investors have a key role to play by giving prominent weightage to ESG factors in their investment strategy. And last but not the least, the governments have to learn to work together. No one country can succeed alone. And finally, decarbonization is not just a matter of sustainability, but for Germany is the only true security of supply solution.