Germany has halted the approval process for the Nord Stream 2 gas pipeline, Europe’s most controversial energy project, following Russia’s move to recognise separatist powers in two regions in Ukraine and its order to deploy troops to those areas.
Olaf Scholz, chancellor of Germany, said today he was pausing the regulatory certification of the 1230-kilometre pipeline under the Baltic Sea, which has been built but isn’t operational. “There has been a dramatic change in the situation,” . He also ordered a review of Germany’s energy supplies by the country’s Federal Ministry for Economic Affairs and Climate Action. For now, the pipeline appears paused, rather than cancelled.
The decision marks a major reversal for Scholz, who had previously called Nord Stream 2 a “purely commercial project” unconnected with the geopolitics of the Ukraine crisis. But what does this decision mean for Germany’s energy future, in the short and long term?
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“It’s a big deal because in the past the German government hasn’t taken a strong position on Nord Stream 2. It’s a new level of policy,” says at Ruhr University Bochum in Germany. “I think it’s going to lead to a re-evaluation of the German energy policy landscape.”
A relationship with Russia has been one of the building blocks of Germany’s energy policy, and has been unquestioned by any German government, he says. While the source of Germany’s gas imports hasn’t been published since 2016, . Most of it flows from Russia through pipelines via Belarus and Ukraine.
“With the escalation [in Ukraine] over the last months this is going to change substantially the perspective on natural gas and of Russia as a trustworthy supplier of cheap, reliable gas,” says Löschel. Other analysts say Germany’s energy review could prove to be just a mechanism to cover the pause on Nord Stream 2, or it could signal a more substantial shift in energy policy.
Löschel thinks it will be the latter. Gas isn’t going away: the agreement by the coalition that formed Germany’s new government in December was clear that gas will still play a role in the country’s energy system. Löschel expects to see a diversification of gas supplies, with a focus on importing liquefied natural gas via tanker ships from other countries. Even Green party politicians in Germany now back liquefied natural gas terminals, he says.
In parallel, Löschel anticipates an acceleration of renewable energy deployment and schemes to insulate and upgrade the energy efficiency of buildings. There will also be discussion about how to speed up the transition to green hydrogen, he adds. While that has previously been seen as a long-term move, it will become more urgent, he says.
“The crisis has shown that relying on natural gas imports is a risky strategy,” says at the NewClimate Institute in Germany. “The only solution is to massively expand renewable energy, even faster than the new plans of the German economics ministry.”
at the German Institute for Economic Research says that in the short term, gas supplies are secured. Current gas storage levels in the country are relatively high. However, European gas prices as markets responded to Scholz’s announcement. “Further price increases are to be expected, but not because Nord Stream 2 is being stopped, but because this is a very serious geopolitical crisis in general,” says Kemfert.
Today’s decision could affect Germany’s energy mix. It is unlikely to deter the country’s intent to phase out nuclear power by the end of this year, says at University College London. But he says it could imperil its timeline for phasing out coal power.
The new German government is considering bringing forward the target for ending the use of coal power from 2038 to 2030. However, high gas prices last year saw German coal use rise, and 2021 carbon targets for the country’s electricity sector are expected to have been missed. The same is likely to happen in 2022. “We will see our coal power plants used a lot in the upcoming months and potentially two or three years,” says Löschel, who sits on an expert commission advising the German government over the coal phase-out. Despite the short-term challenge, he doesn’t think the 2030 phase-out is endangered.
The lasting legacy of the Ukraine crisis and Nord Stream 2 being paused will be two-fold, says Löschel. One is a substantial change in how Germany views Russia as an energy partner. Previously it was seen as a future supplier of low-carbon alternatives to gas, such as hydrogen. “These considerations are now really off the table for a long, long time,” he says.
Second is a shift in how Germany talks about its transition to low-carbon energy. “I think we will see a re-evaluation looking more at energy security issues and on affordability than on the environmental perspective,” says Löschel. “This is really a shift in narrative.”
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