German Chancellor Olaf Scholz is visiting Canada this week while his country faces a level of energy supply risk that many Canadians would have trouble imagining.
For years, Germany allowed itself to become heavily dependent on oil and gas imported from Russia, a mistake that has left the European Union’s biggest economy deeply vulnerable after Vladimir Putin’s invasion of Ukraine. The geopolitical crisis has been a catalyst for the country, and the continent as a whole, to accelerate the transition off fossil fuels with a determined embrace of energy efficiency, renewable energy, and energy storage.
But to break through to that future, Germany and other EU countries have been scrambling for short-term fossil energy supplies to get it through a cold winter ahead, with one commentator predicting something akin to the “Hunger Winter” that devastated Europe in 1944 and 1945.
Scholz acknowledged the challenge in more measured language during his annual summer news conference in mid-August. “We will do everything to help citizens get through this difficult time,” he told media.
The chancellor “pledged his government won’t leave citizens freezing or unable to pay their energy bills but acknowledged Thursday that his country faces considerable challenges in the coming months,” The Associated Press reported at the time.
The Harsh Reality Ahead
But the harsh reality is that “Germany and Europe are facing a difficult winter, as Russia is increasingly falling away as a key energy supplier,” Clean Energy Wire wrote. The country may not be able to replenish its gas stockpiles this summer, the Berlin-based e-newsletter added.
“If gas supplies through the Nord Stream 1 pipeline connecting Germany with Russia dry up completely, the country will not only have to reduce overall gas consumption by 20% but also find substantial additional supply and lower exports to avoid a shortage.”
Without “appropriate measures”, an analysis by Germany’s Federal Network Agency (BNetzA) projected a winter gas shortage equivalent to one-third of total demand. And with Russia constantly adjusting and readjusting gas flows through Nord Stream 1, “worries about a possible halt to gas deliveries have brought the issue of solidarity between member states, in case of a shortage this winter, to the forefront,” Clean Energy Wire says.
That was a reference to bilateral “solidarity” agreements that EU countries were supposed to negotiate, providing that “in the event of a severe gas crisis, neighbouring member states will help to ensure gas supply to households and essential social services,” Clean Energy Wire explained August 10.
Scholz maintained he wasn’t concerned about divisions among EU member countries or unrest at home. “We have taken decisions to improve our energy supply and to ensure that we create European infrastructures that make mutual support easier,” he said. “That’s why I’m sure that—if things get tight now—we will continue to show solidarity. Germany will, in any case.”
But so far, the mechanics of the bilateral solidarity agreements have been delayed, and talk is beginning to turn to the fuel rationing that would be required if Putin maximized his use of gas supplies as a weapon.
“It is wartime,” said Tatiana Mitrova, a research fellow at the Columbia Center on Global Energy Policy, on a recent podcast.
“This is something that European politicians and consumers didn’t want to admit for quite a long time,” she added. “It sounds terrible, but that’s the reality. In wartime, the economy is mobilized. The decisions are made by the governments, not by the free market.” The end result might extend beyond the record high prices Europe has already seen to the “physical absence of energy resources in certain parts of Europe.”
Germany Tries to Minimize the Pain
All of which explains why Germany is moving on multiple fronts to minimize supply shortages this winter. The response includes a major push to build new import terminals for liquefied natural gas (LNG)—with the likely over-optimistic promise that the new infrastructure can later be converted for green hydrogen. The government is introducing the third in a series of consumer relief packages to help citizens cope with rising food and energy costs, along with energy efficiency legislation that includes a 19°C indoor temperature limit for public buildings. The country is also in the midst of a national debate on whether to lift a ban on natural gas fracking, the Globe and Mail says.
Meanwhile, Scholz’ coalition government has permitted utilities to reopen idled coal and oil plants to reduce short-term dependence on Russian gas. And it is now revisiting what the New York Times calls its “political energy taboos” by considering an extension for its last three nuclear plants, which were slated to close at the end of this year.
That decision, details of which were still in flux last week, “would mark the first departure from a policy initiated in the early 2000s to phase out nuclear energy in Germany and which had over time become enshrined in political consensus,” the Wall Street Journal writes. A formal cabinet decision on the extension may still be weeks off, and the WSJ says it would also require a parliamentary vote.
While his country also continues to buy Russian gas, AP said, Scholz stressed that “the most important thing we can do to achieve (energy) sovereignty in the future and simultaneously do what’s necessary for our economic future is to expand renewable energy and protect the climate.”
Still No Place for Canadian Gas
Despite the brutal short-term future Germany faces, there’s still no realistic path for Canada to ramp up LNG exports in time to make a difference. The near-certain end of those discussions was reported exclusively by The Energy Mix last Monday and later confirmed with a Globe and Mail report that “prospects for a rapid expansion of liquefied natural gas exports from Canada will not be a topic of discussion” during Scholz’ visit this week.
As far back as mid-May, independent analysts were raising serious flags about the time it would take to get LNG exports organized, the viability of at least one of the companies proposing to do so, and the near-certainty that future gas demand would evaporate by the time a 20-year supply contract would begin to pay off.
“Opening a new LNG export facility in five years would be irrelevant to the current energy crisis in Europe,” added Brian O’Callaghan, lead researcher and project manager at the UK’s Oxford Economic Recovery Project, in an early July release from the Sierra Club of Canada Foundation and the Council of Canadians. “Building a new LNG export facility in Canada sounds like an enormous stranded asset in the making.”
Europe has also been hearing pushback on its scramble to line up LNG supplies from Africa, with Mohamed Adow, director of Nairobi-based Power Shift Africa, scorching Germany and Italy for trying to “saddle” the continent’s developing countries with new fossil fuel infrastructure that will drag down their economies.
“We must respond with a firm no, and instead demand that European countries support us in the development of renewable energy systems,” he declared last month.
But those realities don’t relieve the equal and opposite pressure—that even if Europe can deliver on its ambitious energy transition plans, the shift won’t happen by winter. With Russia’s oil production largely stable and Moscow “milking its oil cash cow”, Bloomberg columnist Javier Blas says Putin is “earning hundreds of millions of dollars every day to bankroll the invasion of Ukraine and buy domestic support for the war.”
And he can still “afford to forego revenue by restricting natural gas sales to Europe, putting pressure on Berlin, Paris, and London, which are bracing for massive retail energy price increases and potential shortages that may lead to rationing this winter,” Blas continues.
“In public, European governments are still resolute in their determination to wean themselves off Russian energy,” he writes. “Privately, they must be acknowledging the hardships that stance threatens to inflict on their economies. Putin is winning the energy battle; let’s hope that leverage isn’t powerful enough to prompt Western politicians to soften their stance in the real war.”