Hard power: The impact of the Ukraine war on Germany's electricity generation
Public policy and regulatory expert Andrew Horwood takes another look at how the EU's most populous country is doing with its efforts to decarbonise its energy sector. It seems that Putin's invasion of Ukraine has helped.
For me, 2020 feels like decades ago. We’ve lived through a series of “unprecedented times” since the start of that year, our “new normal” is starting to actually feel more normal, and we’re no longer being hyper-alert when someone coughs.
The pandemic illustrates that a few years is enough time for everything to change. In an article back in May 2020, I looked at efforts in the UK and Germany to generate a greater share of their electricity from renewable sources and I drew out lessons for Aotearoa New Zealand. In summary:
· In Germany, renewables were replacing nuclear generation, meaning increased renewable generation had only a limited impact on goals to decarbonise.
· In the UK, renewables were replacing coal generation, meaning the UK was much more effective than Germany in reducing emissions from electricity generation.
· In Aotearoa, we’re lucky to have a healthy supply of renewable energy but we face a few challenges to get to 100% renewable generation.
Andrew Horwood
As well as the full unfolding of the pandemic, a major change since I wrote that article has been that Russia invaded Ukraine in February 2022. Germany had been importing much of its energy from Russia (in the form of oil, gas, and coal), but international condemnation of the invasion saw Germany looking for alternatives.
This article examines how Germany’s energy outlook has changed since 2020. In particular, it looks at the implications of the Russia–Ukraine War for Germany’s aspiration to decarbonise its electricity generation.
GERMANY IN 2020
My 2020 article looked at Germany’s Energiewende programme – “Energy Transition”. The programme’s main objectives include a complete phasing-out of nuclear power plants by 2022, and escalating targets for renewable electricity generation. The targets set in 2010 were 20% by 2020 (later raised to 35%), and 50% by 2030 (later raised to 65%, and now 80%).
Energiewende is integral to decarbonising Germany’s electricity production, and its objectives sit alongside the country’s carbon-reduction target. As of 2020, some progress had been made in increasing the share of renewable generation, but renewables were largely displacing nuclear generation, rather than coal generation. This is in part due to the different levels of political influence and “social licence” that the two industries have: nuclear power is associated with disasters – Chernobyl 1986, Fukushima Dai-ichi 2011 – while the coal industry is strongly unionised and able to wield substantial political influence.
Renewable resources contributed half (49%) of Germany’s (national grid) electricity generation in the first half of 2022, up from 38.5% in 2017. However, the Energiewende programme had been failing to reduce carbon emissions as much as the German government would like. In 2018 the International Energy Agency (IEA) found that Germany had reduced its total emissions by around 31% compared with 1990, meaning it “remains far off its 2020 emissions target of a 40% reduction”.
Attention has now turned to the medium-term targets. A key question is to what degree the targeted 65% renewable generation by 2030 will help Germany reach its goal of reducing carbon emissions by 55% below 1990 levels by 2030.
RUSSIAN ENERGY HAS BEEN VITAL FOR GERMANY
In a March 2022 report, MFAT noted that at that time Russia was supplying Germany with more than 50% of its gas, more than 50% of its coal, and more than 30% of its oil. MFAT wrote:
"Germany’s heavy dependence on what have until recently been relatively cheap and stable energy imports from Russia has suddenly become a major economic risk. German industry relies on the import of Russian gas – sent direct to Germany via pipeline – and does not currently possess national terminals for the import of liquefied natural gas. Russian gas continues to flow into Germany for now, but with a European (or Russian) energy embargo looming and the German Government seeking to reduce dependence as quickly as possible, gas prices on the spot market have increased tenfold year on year, despite businesses anticipating a decline this year. This is driving both electricity cost and the cost of using gas in industrial processing, making certain economic activities economically unviable."
Germany was in an awkward position – it couldn’t go cold turkey on Russian energy instantly. The reality was that half of German households were heated with gas, much of which has come from Russia.
THE EFFECT ON ENERGIEWENDE
As early as April 2022, Germany announced that it would “wean itself off Russian natural gas as soon as possible”. It has done this in several ways:
· using coal in the first instance
· finding new energy partners
· increasing its renewable electricity generation, and
· building a more interdependent European market.
Using coal in the first instance
Germany first turned to coal to provide energy previously provided by Russian gas. German coal imports rose 8% in 2022, even though Russian coal exports to Germany dropped by 37% that year. That Russia remained Germany’s top supplier of coal despite this decrease shows the dominant position Russia held in European energy markets.
The decrease in coal imported from Russia was partially offset by a 32% increase in imports of coal from the US, and increases from other trade partners.
Coal was prioritised over gas as a means for generating electricity, to help ensure gas would continue to be available as an input to industrial processes.
Russia accounted for only 2% of German coal imports between January and October 2023. In comparison, Russia had supplied 53% of German coal imports in 2021.
Finding new energy partners
Germany has also found new sources of gas supply. The country has been turning to Norway for its gas, increasing its imports from 20% in 2021, to 33% in 2022. Norwegian gas suppliers have relished this new opportunity provided by the largest demand centre of natural gas in Europe, and Norway has expanded its gas fields north of the Arctic Circle.
Germany has also built expensive regasification plants (with the first one operational in late 2022) to enable it to import and distribute liquified natural gas (LNG) from exporters like the US and the Gulf states, without relying on pipelines from Russia.
Germany has signed a long-term LNG supply agreement with QatarEnergy and ConocoPhillips – its first ever agreement of this kind – offering 2 million tonnes of Qatari LNG every year for at least 15 years (starting in 2026). In contrast, Germany has not received any LNG directly from Russia since August 2022 (although a small percentage of the gas it imports from the Netherlands and Belgium is probably Russian in origin).
Increasing its renewable electricity generation
There’s some good news for climate action in Germany’s response to its energy problems. Now that it’s reducing its use of piped Russian gas and incurring significant upfront costs to draw on alternative gas supplies, electrification and generation from renewable sources has become relatively more attractive.
2022 saw Germany set a new national record for renewable electricity generation, reaching 46% of total electricity consumption, up from 41% in 2021. Renewables accounted for 56% of energy consumed in Germany in the first three months of 2024. This reflects favourable weather conditions (sun, wind) – unusual for a country that coined a term for grey, still weather and the poor electricity generation that comes with it: “Dunkelflaute”.
It also helps that Germany added 6.1 GW of solar and 2.7 GW of wind capacity in 2022.
After the energy crisis initially delayed Energiewende, Germany decommissioned seven coal-fired power plants with a combined capacity of 3.1 GW (about three Huntly Power Stations) in March 2024.
Building a more interdependent European market
Germany is also working with its neighbours to strengthen Western Europe’s energy security and support climate targets. For example, contracts were awarded to construct a new 725 km, 1.4 GW cable between Germany and the UK.
The EU has set a target of 15% interconnectivity by 2030, to support climate targets. This means each country should have electricity cables that allow at least 15% of the electricity produced on its territory to be transported across its borders to neighbouring countries. Germany shares a land border with nine neighbours, meaning it’s particularly well placed to benefit from this initiative.
CLOUDS AND SILVER LININGS
It may be an easily falsified cliché that every cloud has one, but it’s hard not to see a silver lining in the impact of the Russian invasion on Germany’s energy picture. The invasion has compelled Germany to reduce its reliance on Russian fossil fuels. Although its initial response was to use coal sourced from outside Russia to generate electricity, Germany quickly pivoted to other strategies, and so has been able to continue decommissioning coal-fired power plants.
Germany’s emissions hit a 70-year low in 2023, largely due to its reduced use of coal. The country also shuttered its last nuclear power plants in April 2023, meaning that any additional renewable generation capacity is now displacing fossil fuel generation. So there’s cause for optimism about Germany meeting its Energiewende targets.
The challenges for Germany may now shift from building renewable generation to ensuring that the grid is modernised, and that energy back-up and storage is available (for example, batteries) to complement its largely renewable generation.
Speaking of cliches, it seems fair to make use of the pandemic’s favourite adjective to describe the kinds of shifts going on in the German energy sector as it changes energy suppliers and increasingly decarbonises – they’re unprecedented.
POSTSCRIPT: THE SITUATION IN AOTEAROA NEW ZEALAND
Germany’s experience illustrates the challenging intersection between decarbonisation and energy security. Aotearoa New Zealand faces unique but related challenges to Germany in the transition of its electricity system.
We rely mainly on hydropower for electricity generation and this means that already a high proportion of our power is generated from renewable sources (roughly 85% on average). But the security of supply is threatened when lake levels are low or when major power stations are shut or operating below capacity while being serviced. Other renewable forms of generation have similar problems – for example, solar power and wind power rely on favourable weather.
Fossil-fuel generation provides energy when conditions are unfavourable for renewable generation. This is more challenging where there are major outages (for example, for maintenance work) in the fossil-fuel power plants and may become more challenging if our natural gas reserves deplete.
While the electricity generated for our national grid generally comes from local sources – renewables or New Zealand gas fields – we are likely to still need imported coal from time to time to keep the lights on. New Zealand even became a net importer of coal in 2021 to provide power when hydroelectric generation was less available.
Distributed generation is on the rise in Aotearoa, but it tends to be from renewable sources (like rooftop solar) and so is exposed to the risk of unfavourable weather. This is somewhat offset by the presence of batteries for energy storage. Distributed generation currently contributes only a small portion of our electricity, but will probably play a greater role in the future.
We don’t have a large interconnected market like Europe where we can buy and sell excess electricity easily. For example, we don’t pipe natural gas between New Zealand and other countries. Our ability to produce renewable electricity and source gas domestically provide reasonable energy security. However, the occasional need to import coal for electricity generation (and oil of course) links New Zealand to international markets and geopolitics and the associated risks.
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