Germany is in a world of hurt over natural gas, the price of electricity, and its energy policy in general. Let’s look at how we got here…
EU 0 – Putin 1
The following from Eurointelligence on December 17, emphasis mine.
Olaf Scholz [German Chancellor], like Angela Merkel before him, is a master of the art of saying nothing and of giving people the impression that he said something. Last night he did say something that should make us listen up. He repeated Angela Merkel’s assertion that Nord Stream 2 is a private-sector project that should not be interfered with by the state. So he keeps prevaricating, even now that Russia is making preparations for an invasion of Ukraine.
We should not be blinded by Annalena Baerbock’s [Minister for Foreign Affairs of Germany] expulsion of Russian diplomats, in response to a murder in Berlin, organised by the Russian state. The coalition’s priority will be to secure Germany’s energy security. Yesterday, we staked out a scenario in which a Russian invasion of Ukraine could actually lead to an accelerated approval process for Nord Stream 2. And we don’t think that the Greens want to be held responsible for gas shortages during a cold winter. Right now, they can blame Angela Merkel’s inconsistent energy policies for anything that goes wrong during this winter. And Nord Stream 2 is now in the hands of the German and European regulators and courts, which is just as well.
Right now, EU leaders are discussing a hypothetical: what to do in case Russia invades. If Russia does invade, the discussions would take on a different quality. We don’t see the European Council with a forceful and united response. There will be sanctions of the round-up-the-usual-suspect type.
With gas shortages and rising energy prices, he [Putin] has got the Europeans at the throat now. This is exactly what the Trump administration and the leaders of the Baltic republics said would happen.
We agree with the assessment of Handelsblatt that Nord Stream 2 has turned into a first-order foreign policy disaster for Germany. It is hard to see any good outcomes now.
Cold Temps
Cold temps driving #natgas demand in Europe.
Dutch TTF NG above 170 euro/MWh
Power prices above 300 euro/MWhr (for the whole day!) across the continent https://t.co/40trbO2Fgo
— Mike Zaccardi, CFA, CMT 🍖 (@MikeZaccardi) December 21, 2021
Another cold snap sent Europe's energy price to new record highs. Nuclear power plant outages in France worsened an already bad situation. German day-ahead electricity prices are at 431 euros per megawatt-hour, a record high. High NG prices could shutter fertilizer plants again. pic.twitter.com/WHeMJkfA9z
— 247AG (@247dotAg) December 20, 2021
Germany’s Energy Surrender
Please consider Germany’s Energy Surrender emphasis mine.
Ten years ago 17 nuclear reactors produced about a quarter of Germany’s electricity, but the 2011 Fukushima accident prompted former Chancellor Angela Merkel to phase out nuclear. Six reactors remain: Three will close this month, with the remaining three ceasing operations next year. It’s hard to think of a more self-defeating policy on economic, climate and geopolitical grounds.
The closures have been expected for years, but keeping the reactors open for their previously planned lifetimes could have helped alleviate some of the pain Germans are feeling now as rising global demand drives up the cost of energy. German one-year forward electricity prices have hit €300 per megawatt hour. For comparison, the 2010 to 2020 average was under €50 per megawatt hour.
The antinuclear move has support from many of Germany’s climate-change obsessives, but abandoning carbon-free nuclear power has had predictable results on emissions. Coal was the country’s top energy source in the first half of 2021, generating more than a quarter of Germany’s electricity. Wind and solar produced 22% and 9%, respectively, as nuclear has fallen to around 12%.
Berlin—at the self-made mercy of the sun and wind—is now deepening its reliance on Russian gas to keep the lights on. This is the background explanation for its weak response to Russia’s aggression in Ukraine. Germany’s staunch support for the Nord Stream 2 gas pipeline from Russia, despite opposition from allies, undermines the West’s response to Vladimir Putin’s designs to dominate Eastern Europe.
Germany is now pushing to keep nuclear power off the European Union’s list of “environmentally sustainable economic activities,” a designation that could lower the cost of financing nuclear projects. It’s bad enough that the Germans have undermined their own energy security, but they shouldn’t foist their self-destructive policy on the rest of the Continent.
Merkel’s absurd decision 10 years ago to phase out nuclear energy set the stage for sky-high prices and ironically, even more dependence on coal.
To top it off, Germany is at the mercy of Putin and Russia’s natural gas supply or LNG at very high prices.
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