Germany wants clean, reliable energy. But first, to survive winter.

The Explainer

Energy interdependence worked for Germany before Russia invaded Ukraine; now it’s clear that energy revenues help fund Russian President Vladimir Putin’s war machine. Energy independence from “individual suppliers” is becoming a matter of national security, says German Chancellor Olaf Scholz. 

That vulnerability was made even more evident this month by a halt in natural gas flows from Nord Stream 1 – the massive gas pipeline connecting Russia and Germany – for 10 days of scheduled maintenance. Russia only partially resumed flow today, and the European Commission President likened Mr. Putin’s actions to blackmail. 

Germany is largely dependent on Russian energy, with half its natural gas and a third of its oil coming from that country. There’s currently no other way to quickly secure Europe’s supply of energy for heating, transportation, and industry, says the German government. But they’re trying. Leaders have decided to build liquefied natural gas terminals, which opens up new energy supplies but also raises a bevy of questions about Germany’s energy security.

How realistic are Germany’s plans to switch to LNG as a replacement for Russian gas? 

Nuclear energy has been phased out, and renewables such as wind aren’t yet ready to pick up the slack, so lawmakers have decided that LNG is the answer to Germany’s energy crisis. They’ve announced plans to build two domestic LNG terminals, which re-gasify the supercooled form of natural gas that arrives on ships. Leasing floating terminals and securing supply via terminals elsewhere in Europe is also in the works. Essentially, Germany is trying to buy whatever it can, from wherever it can. 

The short-term fear is that energy supplies will need to be rationed as Europe heads into winter, which means industry won’t get what it needs while households could be without heat when they need it the most. At the most extreme, rationing and skyrocketing gas prices could result in deaths among lower-income households during the brutal winter. With the high stakes, EU lawmakers are working urgently to shore up reserves. They have also been working with Qatar – a dictatorship – as a possible future supply of LNG. 

It’s still unclear whether LNG will do the trick, as Germany’s dependence is so “massive,” says Axel Ruppert, project manager focusing on peace and security issues at Rosa Luxemburg Stiftung’s Brussels office. “Many people within German government are scratching their heads to work out the whole interrelation of supply that’s there, the energy shifts that will be needed, and the terminals that are required, the prices demanded [by LNG suppliers], and the timeframe in which this can all happen.”

Does building LNG terminals push Germany further away from a green energy transition?

LNG is a fossil fuel, and building LNG terminals doesn’t bring Europe’s largest economy any closer to carbon neutrality or meeting the Paris climate agreement. But analysts say lawmakers aren’t abandoning their environmental goals.

Consider the fact that the Germans aren’t willing to sign traditional long-term LNG supply contracts, which are typically 25-30 years in length, says Henning Gloystein, director of energy, climate, and resources for Eurasia Group. Instead, officials are lobbying for contracts of eight to 12 years, to enable an easier transition to hydrogen as part of future gas supply. 

“If you look at the fixed LNG terminals that the Germans will build … that will almost certainly be designed in a way that they can be transferred and switched to importing liquid ammonia in the future, which can then be cracked into hydrogen gas and fed into the system,” says Mr. Gloystein.

The government has also said it would bring forward its 100% renewables target by five years to 2035. Doubling down on natural gas will create “a short term increase on emissions,” says Mr. Gloystein, “but to compensate they will try and accelerate the de-carbonization of its economy in the longer term.”

This dual agenda – to rapidly boost domestic LNG production while also weaning off fossil fuels – means Germany’s overall energy supply will go through a “really awkward cycle,” Mr. Gloystein adds, especially considering new terminals usually require 20 years for return on investment. LNG demand is sky-high now, but by the time the local terminals are all up and running, demand should be dropping off.

By buying LNG, is Germany simply switching reliance on Russia to dependence on the United States? 

Imports of U.S. liquefied natural gas into the EU had already reached a historic high in 2021, with a value of about €12 billion ($12.2 billion). The huge amount of demand in the near term definitely means buying more from the U.S., and that flow should only increase as Russia’s gas supply gets choked off. 

That raises concerns. “Say we flip contracts [from Russia’s Gazprom] to the U.S., and then in two years Donald Trump is president again,” says Mr. Gloystein. “We know that he imposes tariffs and uses energy as political leverage. And that worries a lot of people in Europe.” 

Ultimately, Europeans are aware of the pitfalls of single suppliers, and that’s partly why leaders are visiting Qatar, Norway, and elsewhere to shore up supplies. Longer term, there’s going to be an emphasis on diversity of supply, but right now it’s buy, buy, buy from wherever they can get it. 

How will Germany’s plan to use LNG impact the rest of Europe? 

“This is actually, quietly, a very closely coordinated effort across the European Union,” says Mr. Gloystein. “It’s just Germany gets all the headlines, because it’s the biggest economy, and it has the most awkward relationship with Russia.”

In other words, it’s all hands on deck, with cooperation across Europe where needed. 

For example, the Germans are working with the Dutch, who’ve ordered an additional floating LNG terminal, which will help feed northern Europe. Spain has excess LNG import capacity, which may be shared with Italy and other neighbors who rely heavily on Russian imports. 

“I’m not certain whether the public sees energy as some sort of European love project that they now have to do together, but it’s certainly helped bring governments together,” says Mr. Gloystein. 

“I mean, governments have disagreed on virtually everything before this war. Poland, Hungary, Germany are now agreeing on virtually everything.”