Germany Keeps Making the Same Mistakes

It seems like we’ve written volumes about Germany’s short-sighted energy transition goals encapsulated in its Energiewende. The Energiewende is the ongoing transition by Germany to a low carbon, environmentally sound, reliable, and affordable energy supply. But unfortunately, this aggressive carbon reduction initiative has only raised costs for consumers and put into question the reliability of its grid. And now, the recent unprovoked Russian aggression in Ukraine has only exacerbated these concerns.

Despite aggressive investments in renewable energy, natural gas still supplies a quarter of the energy needs for Europe’s largest economy, with Russia providing around 40% of this crucial commodity.  Germans were already facing an energy squeeze, but Russia’s unprovoked attack on Ukraine compounded the issues. The invasion prompted Germany to halt the certification of Nord Stream 2, making energy supplies even tighter. Not surprisingly, Vladimir Putin’s response has been to threaten to cut off gas supplies entirely.

Putin’s threat has exposed the EU’s “achilles heel.” How? While the European Union placed sanctions on Russian banks’ access to the SWIFT international payment system, it recently balked at implementing similar punitive economic measures on Russian energy imports.

And that’s not surprising! Why? German Chancellor Olaf Scholz and his governing coalition have repeatedly resisted international calls to block these imports, noting, “Europe’s supply of energy for heat generation, mobility, power supply and industry cannot be secured in any other way at the moment.”

So what now?

The German government has signaled an about-face in key energy policies by reconsidering plans to close its coal plants by the end of the decade. There are also plans to build two new LNG import terminals and purchase liquified natural gas (LNG) from the U.S. and other friendlier nations. The first terminal should be online within two years.

The economy and environment ministries say they also intend to invest in alternative energies with “Tesla speed.”

Yet, Germany’s about-face on coal hasn’t extended to nuclear.  Its last three nuclear plants are still scheduled to close by year-end, and Chancellor Scholz’s coalition has no intention of delaying this short-sighted action.  That’s problematic.  Extending their lifespans would mitigate energy shortages and maintain the flow of carbon-free electricity to the grid.

It’s unclear whether Germans will face energy shortages or rationing, but what is clear is that Germany could have avoided this precarious situation. We’ve repeatedly warned that the country will face a shortfall of energy supplies.  And now, that warning is becoming a reality in the shadow of Russia’s invasion of Ukraine.

There’s not much good that will come out of this invasion. Still, hopefully, it will encourage the Scholz government to pivot off its dependence on Russian natural gas, hasten its acceptance of LNG imports from the U.S. and other less combative regimes and reconsider its stance on nuclear power.  Doing so could help Europe’s economic powerhouse meet its Energiewende goals in a more affordable and reliable fashion.