Wire cage for Nord Stream 1 pipeline. Photo: Nord Stream AG.
Dossier
10 Aug 2022, 09:00
Ending dependence on Russian fossil fuels

Putin’s war against Ukraine and its implications for the German and EU energy transition

The war against Ukraine is shaking the foundation of Europe's energy and security architecture, as a decade-old reliance on Russian fossil fuel imports is set to come to an end. Germany in particular has made trade with Russia the bedrock of its energy strategy, planning to strongly rely on imported gas in its transition towards a climate neutral economy. This approach to a large extent fell apart with Russian president Vladimir Putin’s order to launch the largest military invasion in Europe's post-World War history. Russia's attack has triggered a rapid reorientation in Germany's, as well as the EU's, energy supply strategy: ideas range from diversifying fossil fuel imports via LNG deliveries and prolonged running times for coal and nuclear power plants, to a fast and determined expansion of renewable power sources on grounds of national security. This dossier provides an overview, background and rolling coverage of the effects that Putin's war has on energy supply, the energy transition and climate action in Germany and Europe. [UPDATES throughout]

Content:

    1. Latest news

    2. Key facts and background

    3. Major stories

 

1. Latest news

Photo: CLEW/Wettengel.

War on Ukraine: Tracking the impacts on German energy and climate policy

This constantly updated article tracks key developments of Germany's energy and climate response to the war.

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2. Key facts and background

Photo: Adobe Stock.

What happens if Russia's gas supplies to Germany are cut?

This factsheet explains why and when gas deliveries from Russia could be stopped, the immediate and long-term effects, and the precautions that Germany and the EU have put in place as a response. It also lists suggestions of experts to talk to for further information on the topic, as well as important documents for journalists covering this story.

Key challenges of a halt to Russian fossil gas imports

Aside from rising gas prices due to supply bottlenecks, Europe and Germany must overcome additional practical hurdles as part of their efforts to end their reliance on Russia. This factsheet explains the key technical challenges a halt of Russian gas imports poses.

Photo: RWE AG.

Q&A: Is Germany reverting to coal to fight the gas supply crunch?

This Q&A explains what Germany’s coal revival plans entail, how they will work practically, what problems may arise and what it means for the country’s coal exit.

The practical challenges of an embargo on Russian oil

This factsheet compiles information on the practical challenges an embargo on Russian oil entails for the German oil infrastructure, refineries and security of supply.

Photo: CLEW/Wettengel.

Q&A: How can renewables enable Germany's energy independence push?

The war’s outbreak has given wind power, solar PV, bioenergy, hydropower and other renewable power sources a new label: “Freedom energies” that can enable the country to vastly reduce its energy dependence and form the bedrock for decarbonising the economy. This Q&A looks at the plans for the transition to a power system based on 100 percent renewables and what can be done to speed it up.

Germany’s 2022 renewables and energy reforms

This factsheet gives an overview of the renewable energy reforms Germany is pursuing this year and the stage they are at in the legislative process.

Q&A: How could Germany and the EU weather a fossil fuel embargo on Russia?

This Q&A from March 2022 explores the conditions under which Germany could make itself independent from Russian fossil fuels.

Germany’s reactions during the early days of the war

Read about how Germany’s government and industry tackled the energy and climate fallout around the outbreak of Russia’s war against Ukraine in our articles - German govt’s climate policy has been through baptism of fire in first 100 days, Russia’s invasion of Ukraine forces Germany to come clean on energy transition strategy and Solar and wind rollout doesn't depend on Russian exports but e-cars do – German industry.

Europe’s gas crisis – boon or bane for climate policy ambitions?

Europe’s gas crisis started months before the outbreak of the war. The continent experienced new extremes in energy price hikes, caused by strong demand for natural gas during the economic recovery from the pandemic, and further exacerbated by geopolitical tensions between Russia and the West. The factsheets in this dossier explain what caused the early rise in energy prices, what Germany did to help households, and how the government planned to ensure a secure energy supply in the future while sticking to its climate targets.

3. Major stories

The quest for alternatives – ending Germany’s dependence on Russian fossil fuels

In the weeks following Russia’s invasion of Ukraine, the German leadership announced it aimed to end the dependence on Russian fossil fuels, making clear distinctions between the different energy sources and emphasising time and again that natural gas dependence would be the hardest to tackle. While Germany wants to almost completely exit Russian coal and oil by the end of 2022 – and supported EU embargos on these – the target for gas is to become “largely independent” by summer 2024. Imports of Uranium from Russia cease anyway, as the country’s last three nuclear power plants are scheduled to be turned off by the end of 2022.

Photo: CLEW/Wettengel.

However, supply reductions imposed by Russia could speed up the process. When Russia started to introduce sanctions on European companies and cut supplies to several states, economy minister Robert Habeck said the country was “weaponising” gas energy deliveries. This made the search for alternative sources even more pressing.

The chancellor and ministers have been visiting potential supplier countries around the globe to secure new gas reserves, such as Senegal and Qatar, while also aiming to reach more climate-friendly partnerships on renewables and green hydrogen; for example with the United Arab Emirates and/or Australia. The idea of building a hydrogen pipeline to Norway is also being entertained

At home, the government quickly decided to build up Germany’s own import infrastructure to receive liquefied natural gas (LNG) from countries without direct pipeline connections. Politicians have mulled ideas on exploiting Germany’s own fossil resources, such as extracting gas under the North Sea or even fracking it up North in the country.

Photo: CLEW/Wettengel.

Getting through winter – ensuring gas supply security and saving fuel

A secure gas supply for the industry and heating homes has become the defining energy issue when it comes to the fallout of Russia’s war in Germany – especially in the first winter after the war’s outbreak, when heating needs are set to boost gas consumption. From the early days of the crisis, the government warned that a supply stop from Russia would have severe consequences for the economy. Thus, it has introduced measures and regulation to prepare for a possible halt of deliveries in hopes of  dampening any negative effects.

The government quickly triggered the first stage (“early warning”) of the national gas supply security plan, and then the second (“alert stage”) when Gazprom significantly lowered flows through the key Nord Stream pipeline in June. It introduced rules on how much gas storages must be filled before winter, set up a digital platform to collect information about gas needs from companies to help rationing in the event of severe shortages, and bailed out Uniper – Europe’s largest buyer of Russian gas – to avoid a collapse of its most important gas importer.

Large consumers reduced gas consumption mainly due to the rising gas prices on global markets, while the government urged citizens to do their part by means of an advertising campaign to save energy. European Union member states agreed to cut their gas use by 15 percent from August 2022 to March 2023 on a voluntary basis.

Photo: CLEW/Wettengel.

No compromise on climate targets – will the crisis speed up the energy transition?

It is too early to tell whether the energy crisis exacerbated by Russia’s war against Ukraine will have a positive bottom-line effect on Europe’s move to climate neutrality. Germany’s new government had started its term with optimism about launching a vigorous climate action programme after two difficult years during the pandemic – then the war broke out, putting Scholz’s team through a baptism of fire during its first 100 days in office.

Chancellor Scholz has insisted that the emergence of a new crisis does not mean other major global crises can be left unattended. The government also regards the move to climate neutrality as the best way to lessen dependence on Russian fossil fuels – just like other stakeholders, including industry – and said it aimed to double down on efforts to transform the energy system “at Tesla speed”. The three-party coalition pressed on with various energy and climate projects and adopted what it called the “biggest energy policy reform in decades” in April, and a second batch of legislation in June, as well as smaller changes such as improving energy efficiency in buildings. All of this is part of a larger 2022 climate action programme, which has yet to be published in full.

Under Germany’s presidency, G7 leaders during their summit in Bavaria said that they would not compromise on climate goals as they tackle the fallout of Russia’s war against Ukraine.

Several reports by think tanks and consultancies expect the war to boost the transition, and not hinder or possibly even accelerate Germany’s coal exit. Others say that higher gas prices over the coming years will make a market-driven coal exit by 2030 – the end date planned by the government – much harder.

In addition, the war against Ukraine and its effects like rising prices have caught up with, or even overtaken, climate change to become the most important issue for Germans.

Photo: Preussen Elektra.

(Temporary?) boost for coal, nuclear and fossil fuel infrastructure  

In the long term, renewables are thought to be able to guarantee Germany’s energy supply security. However, at present, Russia’s war has shaken Germany’s energy supply architecture to its core and revived debates about bringing back conventional sources which many expected to be settled for good.

Aside from planning to invest in foreign gas infrastructure , chancellor Scholz single-handedly decided Germany would build its own LNG import terminals – something for which there had been no economic case in the past due to the abundance of cheap Russian gas. His government even introduced a special law to speed up the planning procedures to build the terminals and connect them to the grid.

The government further decided to allow coal power plants that had already been retired or put in a reserve to come back online to replace gas in the power sector. This not only poses challenges for energy companies to find enough personnel to operate the coal plants, but it will also likely push up German CO2 emissions in the energy sector this year. However, emissions are still governed by the overall cap under the EU Emissions Trading System (ETS). The government has said it remains set on its target to “ideally” phase out coal by 2030. 

Politicians and other stakeholders – including finance minister Christian Lindner – have also started a renewed debate about nuclear power, proposing to extend the lifetime of the country’s three remaining reactors. An assessment by the economy and environment ministries in March had found that prolonging the runtime to be  not advisable in the current energy crisis, but calls persist and the government is running another assessment in August to revisit the question.

Photo: BASF.

Business and industry at risk

In the weeks after the start of the war against Ukraine, chancellor Scholz warned that a sudden halt in energy imports from Russia would threaten "hundreds of thousands of jobs" and throw Germany and Europe’s economy into recession. Industry and businesses themselves likewise have sounded the alarm about how a cut of Russian gas – or the rising prices – threatens their competitiveness.

As gas, coal and oil become more and more expensive, businesses increasingly struggle with the additional costs, which is already causing some to lower their output. Analysts say the break with Russia as a natural gas supplier could also cloud the country’s longer-term prospects, as the switch to more expensive LNG could turn out to be “a structural game changer for the export-oriented business model.” Certain gas-intensive companies also face technical hurdles when supply is reduced or cut.

While the government has emphasised it cannot make up for all the additional burdens, it has introduced support schemes for businesses affected by the crisis – above all for the energy intensive industry. At the same time, companies have already cut production due to rising energy prices, and business associations have launched an appeal to save energy.

Photo: CLEW/Wettengel.

Inflation – what rising prices mean for households and society

Across Europe, the rising energy prices have also become a key driver of inflation, which is only just starting to strain households, especially low- and mid-income ones – with Germany being no exception. Heating gas bills could more than triple, and researchers say “energy poverty” could become an issue also for the middle class. With price rises across the board, consumer spending is expected to decline as well, putting further pressure on the economy.

The government has so far introduced several relief packages. It lowered prices for petrol and diesela controversial measure – and funded a 9-euro-per-month national public transport ticket during the summer. Discussions about further relief are an ongoing issue in the public and political debate.

Media reports also said that far-right extremists started to mobilise for a “hot autumn” of protests against soaring energy prices on social media, with the aim to threaten social cohesion in the country.

Image: ENTSO-E.

European cooperation, solidarity and disputes

Every European Union member state determines its own energy mix, limiting EU power in this field. However, as a political bloc with an already well-connected energy system, especially when it comes to the gas grid, the European Union has taken the lead on questions like embargos, diversification and energy saving efforts. At the same time, rifts between countries with vastly different energy supply conditions have often made compromises difficult; when Russia-dependent state Germany asked for solidarity during the gas shortages, many governments were quick to point out that Germany had put itself in today’s difficult position. Still, if Europe’s largest economy falters, neighbouring states will be affected, too.

The German government was quick to admit to its mistakes of the past (often blaming former leaderships under chancellor Angela Merkel), which had helped manoeuvre Germany into a heavy dependence on Russian fossil fuels. Now, the country is looking to deepen cooperation with its neighbours and emphasises the need for European solidarity where it can.

Image: Viessmann.

Crisis gives boost to hydrogen, heat pumps and other technologies

While the fear of a severe shortage of gas over the winter is giving rise to counterproductive developments – such as customers swarming shops to buy electric heaters, potentially increasing the risk of grid issues – the crisis is also helping to push technologies which are key to the energy transition.

As a majority of homes are still heated with natural gas, rising gas prices have caused a run on renewable heating systems, with heat pumps firmly in the spotlight.

Expensive gas also means green hydrogen is now economical much faster than expected and could significantly accelerate the ramp-up of the hydrogen economy. The government’s plan to make new LNG import terminals “hydrogen-ready” has pushed discussions about what this means and how green hydrogen could be produced, transported and used at new levels.

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