• English Site
• >Under the Scope
• >

  Putin's Cold War: Germany's Energy 'Wake-Up Call'

Putin's Cold War Germany's Energy 'Wake-Up Call'

By Frank Dohmen, Alexander Jung, Wolfgang Reuter and Hans-Jürgen Schlamp

Part 2

Since Russia began supplying gas to the Federal Republic of Germany in 1970, the country has relied on the natural resource pumping through pipelines with names like "Union" and "Brotherhood," which would also, in theory, provide for rising demand in the future. Three-quarters of newly built German homes have gas heating. Meanwhile, all of Europe uses more and more natural gas to generate electricity.

But according to Latvia's Andris Piebalgs, who serves as the EU's Commissioner for Energy, nations need to be careful about using too much natural gas in their energy portfolios. "That can be dangerous," he says.

The "super-giant" gas fields of western Siberia -- Urengoy, Yamburg, Medvezhye -- lie relatively close to Europe, but they're almost exhausted. "By 2015, at the latest, we expect a significant drop in supply" from those fields, reports the German Institute for International and Security Affairs in Berlin -- "calculating forward to a point in time when Europe's import needs will grow."

Indeed, the Russians want to develop more giant fields, with European help. The planned pipeline linking Germany to Russia through the Baltic Sea promises a huge boost in supply. This northern European pipeline could even open up one of the largest gas fields in the world, in the Barents Sea. But that would also raise dependency on Russia, at least if Gazprom fails to cut the German firms E.on and BASF a share of the fields, as promised.

But the Russians also want to capture new markets, like China. According to the German institute's study, a new shift in attention towards the Far East would reduce Russian gas exports to Europe from a level of about 70 percent (in 2000) to about 33 percent (in 2020).

To make matters worse, import demand in the EU by then "will skyrocket to a level that will overwhelm both Russia's export capacity and its intention to provide." In other words: The west needs to hurry up and find some other source of gas.

For this reason, hopes have shifted south, to north Africa or the Caspian Sea. The richest alternatives seem to lie near the Persian Gulf -- especially in Iran. Tehran has control over the second-largest gas reserves in the world, only a fraction of which has been developed. But the politics are fragile.

Germany would also have to improve its infrastructure just to receive any gas from such remote places. Beyond 3,000 kilometers, delivery by pipeline ceases being economical, and gas becomes cheaper to move in liquid form, known as as "LNG" (Liquefied Natural Gas). Special freighter ships carry the gas -- which has been cooled down to minus 160 degrees Celsius and liquefied for transport all over the world -- except to Germany. The problem here is that no German port has the equipment needed to render the gas back into its natural state so that it can be pumped into a pipeline network. However, Wulf Bernotat, the chief executive of E.on, says his company wants to develop a facility for de-liquefying gas in the northwestern port city of Wilhelmshaven by 2010. LNG will become "an important extension of pipeline gas," Bernotat told SPIEGEL. The cooling process, though, is expensive, so the costs of LNG are still about one-third higher than the costs of pipeline gas.

But in the long run, such investments could pay off. There's no shortage of natural gas. Indeed, exploration has uncovered only about 17 percent of the world's estimated potential. The oil situation is different: about 36 percent of the world's oil has been extracted from the ground. The German Federal Institute for Geosciences and Natural Resources expects a drilling peak in 10 to 20 years. After that, production will sink as demand rises -- at least if consumer behavior doesn't radically change. For the first time in history, a gap in oil supply will open, and oil will stop playing a central role in the energy mix of industrial nations. But renewable energies won't catch up in time to replace it. Right now water power, wind power, and other "renewables" meet around three percent of Germany's energy needs.

Experts lay their hopes on "biomass," which can be converted to synthetic fuel. The earth's natural heat also has huge potential; geothermal energy could make "a decisive contribution to global energy demand," according to a study by Dresden Bank. But it will be years before geothermal energy truly bubbles to life.

Coal, on the other hand, would be instantly usable -- in huge quantities, even mined in Germany, though it is outrageously expensive here. Coal from German shafts costs up to five times as much as coal imported from abroad.

However, wherever it comes, coal -- in Germany mainly brown coal -- is the most important resource for generating electricity. Of course, coal-fired power stations are still a dirty business, and emissions-free electricity production from coal is still a long way off.

"Clean" atomic energy

Operators of atomic power stations don't have the same problems. Nuclear fission does not emit any greenhouse gases. And contrary to comments recently made by Germany's new environment minister, Sigmar Gabriel of the SDP, uranium supplies won't be tapped for a long time. Uranium mining operations have been neglected in recent years only because there was so much uranium on the market from dismantled nuclear weapons. Now, since prices for the raw material have risen, companies have invested in new mines. The Organization for Economic Co-operation and Development estimates that reserves will meet demand for well over 100 years.

Currently, around 27 percent of all electricity consumed by Germans comes from nuclear reactors. The 18 reactors still in operation here will go offline one by one until 2021, according to an agreement reached with the industry in June 2000 by then-Chancellor Gerhard Schröder's coalition government, which included his party, the SPD, and Joschka Fischer's Greens.

So just how the gaps in energy supply will be closed remains uncertain. Germany has already done "a fantastic amount" of work toward renewable energies, says EU Commissioner Piebalgs, but the potential for those sources is still limited. If Germans want to renounce nuclear energy, they need to consider the consequences: "That will naturally lead to higher imports of oil and gas," warns Piebalgs.

Nevertheless, Chancellor Angela Merkel promised last week to protect the nuclear phase-out plan. She had little choice -- she obliged herself to observe the plan by signing her party's government coalition contract with the SPD when she took office last November. According to the phase-out plan, four reactors will go dark during the coming legislative period. What Merkel hasn't mentioned is that it is unlikely a single power plant will shut down -- at least not against the will of whichever company owns it.

The owners, in certain circumstances, can transfer the allowed remaining life span of one reactor to another. Which is to say: The life span of the old reactors now in line to close (called Biblis A and B, Neckarwestheim I, and Brunsbüttel) will be extended by horse-trading allowed "current quotas" to other reactors, or through credits from periodic deactivation.  Economics Minister Glos and his rival colleague Gabriel (from the Environment Ministry) have already agreed this much in a back-room agreement -- according to high-ranking representatives of their parties, the SPD and CSU -- that belies their public squabble. So nuclear power plants may play into overtime.

Of course, tricks and bluffs belong to a business that lies somewhere in the gray zone between state influence and market rules. An oligopoly of German energy firms -- RWE, E.on, EnBW, and Vattenfall -- has divvied up the domestic market, and these four giants control not only networks and circuits but also more than 80 percent of German power-station capacity. They also dominate the natural gas market.

This concentration of power leads some critics to contend that the German energy market isn't free enough, since big foreign companies are largely shut out. Although RWE or E.on can supplement their billion-euro profits with business in the US, Great Britain, or Austria, foreign investors in German energy are rare. So a "new mix" of energy sources would also involve opening German markets to competition.

Chancellor Merkel wants to call an energy summit in the near future, and everything will have to be on the table: dependency on Russian gas, promotion of alternative energy sources, and, of course, the monstrous idea of energy conservation. Homes and offices alone waste around €4 billion in electricity every year. The Berlin government needs to present a plan of action on "energy efficiency" to the EU Commission by summer 2007.

But atomic energy can be factored out by Merkel for the time being; that hot button debate is probably best left to economists and scientists. The chancellor's office is reportedly still pondering how to make an extension of the reactors' life spans more palatable to the SPD, maybe with a deal for an efficient upgrade of renewable energies. 

No matter what, the dream of a new "energy policy" for Germany, like the dream of independence from dirty power, won't be realized overnight.