Cancelling Nord Stream 2 will be celebrated by some, but it raises questions in Germany about how the country can achieve the next significant phase-down of coal, oil and nuclear energy without that extra gas supply.
As Russia sent troops into Ukraine, Germany responded by cancelling Nord Stream 2. That doesn’t leave Germany with an immediate shortage of energy but it now needs to adapt or replace Energiewende, its decarbonising energy strategy for the last twelve years.
Energiewende
In 2010, Germany launched Energiewende – a major strategy for making energy systems more efficient and more renewable. That strategy largely worked.
Thanks to Energiewende, German energy production, supply, consumption and carbon had all fallen even before the impact of the Covid pandemic. Energiewende also facilitated a relatively rapid phase-out of nuclear power – something that Germany set upon after the Fukushima disaster.
Gas, and therefore Nord Stream, has been crucial to that success. Natural gas is one of the few energy sources – along with renewables – that Germany has allowed to grow since 2010, helping to reduce the use of more heavily polluting coal and oil.
So what is Nord Stream?
Nord Stream 1 was a post-cold-war project to connect Russian gas to the heart of Europe via a series of pipelines under the Baltic Sea. It began as a concept in the 1990s although it took until long after the EU’s eastward expansion in 2006 before it fully went ahead. Once it had been built, it became a reliable source of gas for Germany.
Nord Stream 2 is the upgrade of this Baltic pipeline network, potentially doubling Nord Stream capacity to 110bn cubic meters per year. That was controversial even before recent tensions. There is a growing desire to decarbonise faster and eastern members of the EU and NATO were concerned that Russia might prove to be an energy security risk.
So the loss of Nord Stream 2 will be celebrated by some, but it raises questions in Germany about how the country can achieve the next significant phase-down or phase-out of coal, oil and nuclear energy without that extra gas supply.
Alternative energy networks
While Russian exports represent a significant part of German gas imports, gas makes up a relatively small proportion of the country’s energy generating mix – approximately 15%, well below the 40% made up by renewables. That gas supply has not vanished. Nord Stream 1 is still functioning well, as are other import sources. The challenge is therefore not one of replacing lost supply, but replacing future increased supply.
One option may be to invest in alternative cross-border connections. Germany is part of the Synchronous Grid of Continental Europe, connecting it to energy grids across the continent. So it could seek to speed up European expansion of energy interconnections by pushing for the creation of the much-vaunted European super grid.
The European super grid is a proposal to expand interconnectivity not only across the continent but into energy-rich regions like North Africa. Doing that would support the rising role of renewables by balancing different peak spells in different countries. It might also support greater movement of gas within Europe, along with securing long term sources in the Mediterranean.
Slowing phase outs
Such an approach is inevitably long term – as was Nord Stream 2. So another option for Germany would be to slow down its phase-out of other energy sources. This is a meaningful option given that nuclear power, for example, could be kept running well beyond its proposed switch off date of late 2022. Coal too, is still a large part of Germany’s energy mix and its phase-out could be delayed.
That would likely only be a stop-gap measure. The traffic light coalition government in Germany is determined to undertake a dramatic decarbonisation and to end the use of nuclear energy. So although it can slow down those plans while it settles on an alternative energy strategy, it won’t do so indefinitely.
And it may find that pressure now grows to add gas to the list of energy sources it phases out too.
Gas versus renewables
Germany is a world leader in renewable technology and installed capacity. It has also seen just how controversial the gas part of its energy strategy can be.
Germany was seen by many as being behind the decision to add gas power plants to the EU green investment taxonomy. This meant that in specific circumstances a gas-burning power plant could qualify for green finance status just like a wind farm or solar plant.
That caused great anger among green campaigners across Europe. The green part of the German traffic light coalition is likely to feel that concern deeply, with gas always appearing to be a less-than-perfect compromise compared to a far faster expansion of genuine clean energy. That is something it may well look at achieving now, though developing alternative gas options will still be crucial.
Green hydrogen
Germany is already one of the world’s largest investors in hydrogen technology and the abundance of renewable energy resource in Northern Europe makes it a potential green hydrogen superpower one day. But hydrogen comes with some challenges for now.
Firstly, hydrogen energy is still in the early stages of establishing itself and so is presently costly compared to gas. That would be a problem for German consumers and industry.
Secondly, hydrogen is only green if the electricity that produces it is renewable. So while Germany is still burning coal, producing hydrogen is not a low-carbon option and importing it is still difficult to scale up.
Efficiency
With all of that in mind, Germany may also look again at energy efficiency. While many western nations have seen their energy needs drop thanks to the transition of heavy industry to places like China, Germany has achieved energy reductions while remaining one of the world’s major industrial exporters.
Following the launch of Energiewende, German energy consumption has dropped by almost 1% per year, while its economy has continued growing by an average of over two percent per year. With the loss of Nord Stream 2, it may want to examine how that has been achieved and how it can be sped up.
That will not be easy to achieve. Energy efficiency is complex and spans everything from huge transmission grids to consumer products. But it is an important part of the long term energy strategy already so will be part of any future plans.
All of this is something the new German government may feel it has to address rather faster than it previously expected when Nord Stream 2 was still a prospect, but that doesn’t mean it needs to rush.
Identifying the right path to invest in it is more important than rushing. Nord stream 2 was yet online, so Germany has time to examine its energy strategy in full and invest heavily in getting it right.
Update: 28/02/2022
Since this Article was published, German Chancellor Scholz has announced to the Bundestag that Germany will build new LNG terminals in Brunsbuettel and Wilhelmshaven and secure alternative (non-Russian) gas imports.
At the same time, economy minister Robert Habeck has said there are now “no taboos” in regards to delaying the closure of nuclear and coal plants, while also setting out plans to expand renewables to 100% of electricity generation by 2035 instead of 2040.
Chancellor Scholz said: “The events of the past few days have shown us that responsible, forward-looking energy policy is decisive not only for our economy and the environment. It is also decisive for our security”.
