April 11, 2022, By Kalte Sonne
Dear Sir or Madam,
Russia continues to supply the same amounts of natural gas to Europe and Germany. The German government has so far resisted any calls to refrain from importing gas from Russia because it knows that Germany’s economic crash would be devastating.
The wheels of the German production machine would be shut down, nothing would work anymore, hardly anything would be affordable. But why Germany in particular would be hit so hard, the Federal Government is silent. It is the double exit of the energy transition that has made us so vulnerable due to natural gas plus unsteady wind and solar energy. We want to examine the connections below.
But first, as always, to the temperature curve.
The deviation of the global mean temperature of the satellite-based measurements from the average of the years 1991-2020 rose to 0.15 degrees Celsius in March. The mean temperature increase since satellite measurements began in 1979 remains at 0.13 degrees Celsius per decade, about half of the temperature increase calculated by the climate models. For forty years, the temperature development has shown anything but the dramatic development feared by the IPCC.
The German government is approaching reality but is hiding the whole truth
The longer the war in Ukraine lasts, the more voices calling for a boycott of energy supplies from Russia will pile up. The first was former German President Joachim Gauck (pension €385,000), who called for a halt to Russian energy imports: “We can also freeze for freedom.” Soon hardly a day went by in which the demand for an energy boycott was not raised in “Bild” (“Stop the Russian gas”) or “Die Zeit”.
The Tagesschau spread the stupid comments of Martin Ganslmeier (“Expensive, but feasible”) or Kai Küstner (“Energy boycott against Putin now”)..
It is therefore not surprising that the majority of voters of the Greens (71%), the SPD (56%), the CDU (55%) are in favour of an immediate energy boycott. In the end, an energy embargo found the overwhelming majority of the EU Parliament: 413 votes in favour, 93 against.
Against this background, the position of the Federal Government is surprisingly steadfast. She knows what is threatening. None other than Economics Minister Robert Habeck categorically ruled out an immediate embargo in a report to the Economic Affairs Committee of the German Bundestag dated 6.4.2022.
In the coal sector, according to the report, with an import dependency of 50%, a conversion to other supplier countries (e.B. Australia) is possible by the autumn. The stocks at the power plant sites last for about four to six weeks. An earlier exit than autumn would lead to power plant closures after about four to six weeks.
Replacing the 35% oil imports is “targeted by the end of the year” (p.4 of the report). The Druzhba pipeline supplies 750,000 barrels of crude oil, of which 250,000 barrels through the southern branch to supply Hungary, Slovakia and the Czech Republic. It is particularly sensitive that the East German refineries are supplied exclusively by the Druzhba pipeline. They supply East Germany with petrol, diesel and chemical raw materials and have no access to a port location. Through the national oil reserve, crude oil is held in the amount of imports of 3 months.
The dependence into which German energy policy has become in the wake of the double exit of the last three Merkel governments is most serious in the case of natural gas. Natural gas covers a quarter of Germany’s energy needs. More than half of the imported natural gas (only 5% is accounted for by self-production) comes from the Russian Federation. 38% is used in industry (p.5 of the report), 12% in commerce, 30% in residential buildings, 13% in electricity supply and 7% for district heating.
The “Gas Emergency Plan” stipulates that in a crisis situation, the Federal Network Agency will distribute the remaining gas. “Certain consumer groups are particularly protected by law, i.e. they must be supplied with gas until the very end. These protected consumers include households, social institutions such as hospitals and gas-fired power plants.”
(p.6 of the printed matter. ) Should Russian gas supplies fail, the report says, “ensuring security of supply in Germany and its neighbouring countries from next winter is at risk.” In plain language, this means that the work of 6 million employees in 42,000 industrial companies is coming to a standstill. And not only for 3 weeks, but until the summer of 2024, according to the report’s estimate. BASF CEO Brudermüller realistically sees a replacement of Russian natural gas only in 4-5 years and warns of unprecedented economic damage: “Do we want to destroy our entire economy with a seeing eye? What we have built up over decades? I think such an experiment would be irresponsible.”
Robert Habeck’s report also sees an unmet residual demand of 10% in 2024, at least a third of industrial demand, even if the most favorable course – construction of liquefied natural gas LNG terminals and regasification plants (floating LNG terminals) from 2022-24. However, Robert Habeck would still have to convince his Schleswig-Holstein Greens, because they are going into the state election campaign with a rejection of an LNG terminal in Brunsbüttel: “Schleswig-Holstein does not need an LNG terminal.” (Election campaign program p.133)
The German government is concealing from us that a large part of the industry will not survive on this path. Even before Russia’s war, Germany had the highest electricity prices in the world, and gas prices had already risen four to five times due to the energy transition. Compared to US gas prices (Henry Hub about 20 € /MWh), we are at 100-150 € /MWh. LNG gas was up to three times as expensive as pipeline gas before the gas price explosion. The supply of LNG gas instead of pipeline gas will further worsen the competitiveness of German industry.
The development of the gas price in €/MWh Source TTF Dutch Gas price
What is missing is the admission that the energy transition has become unworkable. Phasing out coal and the rest of nuclear power would have required 30 to 50 gas-fired power plants (see coalition agreement), which would have been brought in through additional gas imports via Nordstream 2. This means that in addition to the quantities to be replaced from Russia, a similarly large quantity would have to be procured from overseas. Today, Germany consumes about 95 billion.m³, 50 billion.m³ comes from Russia. Phasing out coal and nuclear energy would require an additional 30-50 billion .m³. Where should 100 billion .m³ come from?
This is more than the LNG volume of the USA (61) and corresponds to the total amount of Qatar (106).
The fact that wind and solar energy are now being rolled out over the German landscape without regard for nature is of little help. In 2021, the primary energy share of solar and wind energy was 5.1% (see chart of my last column) !
If you want to say goodbye to Russia’s dependence on natural gas in reality, you cannot avoid three alternatives:
– Continuation and expansion of the use of domestic lignite, ideally with the CO2 capture developed in Germany,
– Continuation of the use of nuclear energy and reactivation of the nuclear power plants shut down 4 months ago
– Use of the 1300 billion.m ³ shale gas in northern Germany and under the North Sea
Lignite, nuclear energy and shale gas are the good-natured big elephants that stand in the room, but which are overlooked by Robert Habeck, Christian Lindner and Olaf Scholz. These elephants are ours. That would be energy sovereignty. This is always better than a path of “energy patriotism” (Robert Habeck), a term that only provisionally conceals the fact that this path towards 100% renewable energies destroys the German landscape and Germany’s competitiveness.
The merit order of the electricity and gas price
Many readers wonder, how can there be an explosion in electricity and gas prices? Russia still supplies the same amount of natural gas as the other suppliers. However, not all of them deliver at fixed prices. And as with electricity, the gas price of tradable quantities is determined by the most expensive supplier.
The cause lies in the merit order. I would like to explain this on the basis of the electricity exchange.
A merit order is the order of operation of the power plants offered on the electricity exchange. These are sorted in ascending order. The power plant, which is the last to be connected with the most expensive price, determines the stock market price. In the example below from 2019, with 60,000 MW of demand, about 60 €/MWh (6 €ct/kWh). If the gas price rises and the light brown gas-fired power plants go up in price and the most expensive gas-fired power plant produces electricity at 200 €/MWh (20 €ct/kWh), this is the stock market price that everyone has to pay. Renewable energy plants that receive a fixed EEG remuneration feed into the grid, regardless of what price can be achieved on the market. They move the power plant order to the right, the price drops.
With large offers of wind or solar power, the electricity price drops to zero or even below zero (negative electricity prices). At night or in the gust of wind, the price shoots back to extreme heights. However, the graph also shows what happens when the yellow, dark brown or black surfaces of nuclear energy, lignite or hard coal disappear. If there is wind or in the summer noon hours, this will work in terms of quantity. But since the normal state of wind turbines is a standstill (full load hours 25% of the year), extreme price peaks will occur more and more often and if the light brown gas-fired power plants and the oil power plants are not sufficient: lack of electricity, shutdown of consumers, brown-out. The useful tool of the EWI can be downloaded here for free.
With best wishes
your
Fritz Vahrenholt
