Examining Germany’s Post-Russia Path For Energy Sources

Emily Pickrell, UH Energy Scholar

Germany wants to fast-track its path away from Russian gas and is trying to make rapid-fire decisions about fuel sources for national security to do so.

It also hopes it can carve out a path that will enable it to honor its environmental commitments, through a rapid expansion of renewables and increased imports of natural gas from friendlier sources.

“The construction of electricity networks, LNG terminals and renewable energy must be done at ‘Tesla speed’,” said Germany’s Economy Minister Robert Habeck in a recent press conference.

It will be a tough balancing act, involving billion-dollar construction projects that normally take years to plan, permit and build, while the upcoming winter is only a handful of months away.

The first action item on its plan is a rapid expansion of its renewable assets.

It’s a plan that fits well into Germany’s 2019 targets of reducing greenhouse gas emissions by 65% by 2030 and 88% by 2040. Some government officials are also talking about a new goal of trying to meet 100% of its power needs with renewable power by 2035.

And while these goals may sound aspirational, Germany already has a reasonable running start.

It currently generates a little more than 40% of its electricity from renewable power. Its renewable resources are about half of what the U.S. produces and accounts for 8% global renewable generation. Renewables also account for about 7% of transportation and 16% of heating and cooling demand, accounting for about 20% of its overall power consumption.

It has demonstrated that it knows how to scale up quickly, having quadrupled its renewable power generation in the last ten years.

This is especially true of Germany’s onshore and offshore wind assets. Earlier in the last decade, Germany had one of Europe’s highest annual renewable growth rates due to its rapid construction of wind projects, nearing 10% annually. This growth, however, has slowed down significantly in the last five years, as local communities have resisted additional projects with more local restrictions on wind turbines.

At the same time, a massive expansion of renewables would still leave Germany needing to replace a simultaneous reduction in its three current sources of baseload power: natural gas, coal and nuclear. Baseload power traditionally has been the use to ensure reliability in a grid, helping to ensure the lights stay on and the grid remains stable, even if the variable wind and solar fail to perform. Germany’s 25% reduction in wind power the first half of 2021 is a good example of the shortfalls that baseload power could reasonably be expected to cover.

There are other ways to potentially replace baseload power – some argue that energy flexibility provides this same stability, by a creative use of smart grid technologies, gas peaker plants, batteries, demand management and regional exchanges. Yet these new approaches would still need to be designed and tested, and in the case of batteries, rely on technology that is still maturing.

There tendency to underplay the challenge of addressing the baseload issue when it comes to renewables: it can be seen in a 10-point plan recently published by the European International Energy Agency. This plan was designed to reduce European dependence on Russian natural gas by more than one-third within a year. The plan assumes that renewable resources will be sufficient to fill the power gap left by the missing Russian gas. It does not, however, explain how the needed additional renewable buildup will take place, and how reliability in the system will be achieved.

One thing is clear, Germany says it won’t be nuclear.

There are still three nuclear plants running, but officials have already said there are no plans to extend the life-span of these plants to make up for the lost Russian gas.

Germany also hopes not to backtrack on the strides it has taken to reduce its use of coal, but said in late March that it is considering extending its phase-out deadlines. Prior to the war, it had established both legislation and specific closure deadlines for its mines and plants, with compensation for those impacted in the industry.

The other significant challenge is the time and investment it will take for Germany’s grid to be able to handle the increase in renewable power. When a high concentration of wind assets were built in West Texas, for example, it took an additional $8 billon and several years to build the high-voltage power lines necessary for moving the power the long distances to the demand centers.

Added to the list of Germany’s energy dilemma is how its economy factors in.

In this sense, the challenge for Germany is two-fold. First, its economy is heavily dependent on industry and manufacturing. Manufacturing is Germany’s most important sector in industry and accounts for 79 percent of total production. Germany’s industrial sector accounts for 40% of its electricity demand. The majority of its natural gas provides fuel for its industrial sector. This will provide a challenge to replace, as many of industrial processes require massive amounts of energy for their transformative processes.

The importance of Germany’s industrial sector cannot be underestimated: it drives the German economy, which drives the European economy. And constraints on the power that run this would have a global impact.

The second challenge is Germany’s already high-power prices. In January 2022, German manufacturers paid 25% more for power than they had the year before, a tip-off of how the sector is already paying the cost of war.

And it follows a year that had already set a new precedent for high power prices.

A shift to 100% renewables for power will likely make it all that much more expensive.

Germany has already spent more than $150 billion on its climate change ambitions, principally for scaling up renewable power.

A full-fledged green-energy transition is estimated to cost more than $5 trillion in the coming years. A significant portion of that cost comes from the high-voltage lines that renewable power requires. It’s especially important for Germany to build these lines, as its main renewable resource, wind, comes from northern Germany, while its demand is concentrated in urban cities in the south.

And then there will be the mission of selling it to the public that the sacrifice is worth the cost.

Germany had financed some of the costs associated with its renewable expansion through a surcharge paid by consumers with their power bill. It has not been popular, leaving Germans with some of the high electricity bills in Europe. The government now says it will scrap the surcharge.

It’s a help, but still leaves Germany with some of the highest electricity prices in the world, a factor in the International Monetary Fund’s decision to lower the country’s economic growth forecasts last year.

Germany’s Bundesbank has been even more grim, factoring in the cost of the war and the resulting supply chain bottlenecks. Selling the expense of a quick scale-up of renewables on top of a possible recession will be even tougher.

Factored together, it’s understandable how Germany found itself in bed with Putin and his cheap gas resources, even as his autocratic tendencies became harder and harder to ignore.

Getting itself out that bed and its feet out the door is going to require much, much more than just a quick build-up of assets. It’s going to take time, resources and quite likely, an ability to choose wisely between the least worst of its options.

Emily Pickrell is a veteran energy reporter, with more than 12 years of experience covering everything from oil fields to industrial water policy to the latest on Mexican climate change laws. Emily has reported on energy issues from around the U.S., Mexico and the United Kingdom. Prior to journalism, Emily worked as a policy analyst for the U.S. Government Accountability Office and as an auditor for the international aid organization, CARE.

UH Energy is the University of Houston’s hub for energy education, research and technology incubation, working to shape the energy future and forge new business approaches in the energy industry.