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Germany Goes For Full Energy Policy Overhaul Amid Ukraine Crisis

Tyler Durden's Photo
by Tyler Durden
Tuesday, Mar 01, 2022 - 12:31 PM

By Tsvetana Paraskova of OilPrice.com

The Russian invasion of Ukraine upended the energy policy of Germany. In just a few days since Putin decided to invade Ukraine, Europe’s biggest economy - heavily dependent on Russian pipeline gas and the end point of another project to receive natural gas from Russia - has suspended the new pipeline project and said no energy source is off the table when it comes to ensuring German energy security.

Early last week, hours after Russian President Vladimir Putin recognized two separatist regions in eastern Ukraine and deployed troops there, Germany suspended Nord Stream 2, the Russia-led natural gas pipeline project. 

“We now have to reassess the dramatically changed situation: This also applies to Nord Stream 2,” German Chancellor Olaf Scholz said last Tuesday, adding that “The certification cannot take place now.” 

Since last Tuesday, however, the crisis escalated into a full-blown Russian invasion of Ukraine. The European Union and the United States scrambled to draft sanctions against Russia and Putin in such a way so as not to disrupt Russian oil and gas exports, a large part of which go to Europe. And European countries, including the biggest economy in Europe, Germany, outlined new measures in their own domestic energy policies to wean themselves off Russian energy dependence. 

The Russian war in Ukraine placed that dependence in sharp relief - the West wants to punish Putin with the harshest possible sanctions, but it has been reluctant to slap sanctions on Russian oil and gas exports.  

Some European countries realized that having one predominant supplier of gas (or any other commodity) is not a sustainable energy policy, especially in light of the green policies that have led to pledges for phasing out coal in a few years. 

In a major change, of course, Germany - which had argued until a few months ago that it is looking at the purely commercial benefits it would gain from Nord Stream 2 - is now not only putting the project on ice, but it is also supporting the construction of two terminals to import liquefied natural gas (LNG) and is not leaving any energy source - not even coal or nuclear - off the table. 

“We will change course in order to eliminate our dependence on imports from individual energy suppliers,” Chancellor Scholz said on Sunday at Parliament, which had convened to discuss the war in Ukraine. 

“After all, the events of recent days and weeks have shown us that responsible, forward-looking energy policy is not just crucial for our economy and our climate. It is also crucial for our security,” he added.

Germany will build two LNG import facilities, at Brunsbuettel and Wilhelmshaven, the chancellor said. 

The German government has asked energy group Uniper to reconsider its plans for an LNG terminal construction at Wilhelmshaven - plans that the company shelved two years ago because of poor economics, German business daily Handelsblatt reported on Sunday, citing sources familiar with the matter. 

Apart from two LNG terminals, Germany plans to boost the volumes of its natural gas storage and will purchase more gas on the global market in consultation with the EU, Chancellor Scholz said. Coal reserves will also be boosted, he added. 

No energy source is “taboo” in the new German energy strategy to move away from Russian gas dependence, said economy minister Robert Habeck, a member of the Green Party. 

Before Putin’s war in Ukraine, Germany planned to switch off all its remaining nuclear power generators by the end of 2022, while it also looked to retire a large portion of its coal-fired capacity fleet between 2022 and 2024. The country has said it would aim to phase out coal by 2030 – eight years ahead of earlier plans. 

Extending the operation of the remaining nuclear power plants or phasing out coal later than 2030 are options currently under discussion, the minister said. 

“There are no taboos on deliberations,” regarding Germany’s energy policy from now on, Habeck told German television ARD on Sunday. 

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