[ad_1]
Christoph Steitz
FRANKFURT – Germany is bleeding money to keep the lights on. Almost half a trillion dollars, and counting, since the war in Ukraine plunged it into an energy crisis nine months ago.
That’s the cumulative scale of aid and schemes the Berlin government has launched to support the country’s energy system since prices rose and it lost access to gas from main supplier Russia, according to Reuters calculations.
And it might not be enough.
“How serious this crisis will be and how long it will last largely depends on how the energy crisis develops,” said Michael Gromling of the German Economic Institute (IV).
“The national economy as a whole is facing a huge loss of wealth.”
The money allocated is up to 440 billion euros ($465 billion), according to the calculations, which represent the first combined total of all Germany’s efforts to avoid blackouts and secure new energy sources.
That equates to about 1.5 billion euros a day since Russia invaded Ukraine on February 24. Or about 12% of the national economic output. Or about 5,400 euros for each person in Germany.
Europe’s remarkable economy, a byword for wise planning, is now at the mercy of the weather. Energy rationing poses a risk in the event of a long cold spell this winter, Germany’s first in half a century without Russian gas.
The country has turned to more expensive, or cash, energy markets to replace some of the lost Russian supplies, which has helped push inflation into double digits. There is no security in sight, with the effort to build two alternatives to Russian fuel – liquefied natural gas (LNG) and renewable energy sources – years away from the target levels.
“The German economy is now at a very critical stage as the future of energy supply is more uncertain than ever,” said Stefan Cutz, vice president and director of business cycle and growth research at the Kiel Institute for the World Economy.
“Where is the German economy?” If we look at price inflation, it’s running high.”
When asked about Reuters’ collection of the earmarked money, Germany’s finance ministry referred to data on its website. The Ministry of Economy, which is in charge of energy security, announced that it continues to work on diversification of supply, adding that LNG and the terminals required for imports were a key part of this.
More expensive power will indeed be painful for the economy, which is already projected to shrink the most among the G7 next year, according to the International Monetary Fund.
Germany’s energy import bill will rise by a total of 124 billion euros this year and next, compared to a growth of 7 billion for 2020 and 2021, according to data from the Kiel Institute, posing a major challenge for the country’s energy-intensive industries.
The country’s chemical sector, which is most exposed to rising electricity costs, expects output to fall 8.5% in 2022, according to the industry association VCIwhich warns of “enormous structural fractures in the German industrial landscape”.
GRAPHICS: Global economic activity flashes red https://www.reuters.com/graphics/GLOBAL–ECONOMY/PMI/jnpvienikpv/chart.png
GRAPHICS: Red-hot inflation in Germany https://www.reuters.com/graphics/GERMANY–ECONOMY/znvnberldvl/chart.png
CLOSE TO TO THE COVIDCASH
The 440 billion euros earmarked to fight the energy crisis is already close to the roughly 480 billion euros Germany has spent since 2020 to protect its economy from the impact of COVID-19 pandemics.
The money includes four aid packages worth €295 billion, including a €51.5 billion bailout for energy firm Uniper and a €14 billion bailout for Sefe, formerly known as Gazprom Germania; up to 100 billion in liquidity for utilities to secure their sales against default; and about 10 billion on infrastructure for imports LNG.
The sum also includes previously unreported commitments of 52.2 billion euros from state lender KfV to help utilities and traders fill gas caves, buy coal, replace gas supply sources and cover some margin calls, according to data reviewed by KfV Reuters.
Despite these efforts, there is little certainty that the country can replace Russia; Germany imported about 58 billion cubic meters (bcm) of gas from the country last year, according to Eurostat and the German industry association. BDEVwhich represents about 17% of its total energy consumption.
Germany wants renewables to account for at least 80% of electricity generation by 2030, up from 42% in 2021. However, given recent rates of expansion, that remains a distant goal.
Germany installed just 5.6 gigawatts (GW) of solar capacity and 1.7 GW of onshore wind capacity in 2021, the last year on record.
To reach the 80 percent target, new onshore wind farms need to increase about sixfold to 10 GW per year, according to an October report by the federal government and the German states. Solar installations must quadruple each year to 22 GV, it says.
Susie Denison, Senior Policy Fellow at the European Council on Foreign Relations (ECFR) think-tank, said that while Germany had done a “good plaster job” of replacing gas volumes with electricity from the spot market, it had lost its position as a thought leader in clean energy.
“For me, what is really missing in the German strategy is a similar attention to the rapid expansion of renewable energy sources, which is now the time to invest in hydrogen and wind energy infrastructure, to replace gas.”
GRAPHICS: German gas imports by country https://www.reuters.com/graphics/GERMANY–GAS/znvnbbbjlvl/chart.png
GERMANYFLOATSLNGPLAN
In March, Economy Minister Robert Habek set a goal to replace Russian energy by mid-2024, although many economists and power industry players consider that too ambitious.
For example, Marcel Fracher, president of the German Institute for Economic Research, and Markus Kreber, Director the largest German producer of electricity RVEexpect this to happen not before 2025, and only then if alternative sources are found or rapidly expanded.
On the LNG ahead, too, there is a mountain to climb.
Germany does not LNG own infrastructure because it has been relying on Russian gas for a long time, and is only now starting to build its own LNG possibility of import.
For now, it plans to rely on six floating import terminals to help diversify its gas supply, the first of which is due to arrive on Thursday. Three should be online this winter, while the others will be deployed in late 2023, bringing the total capacity to at least 29.5 billion cubic meters per year.
RVEUniper and the smaller EnBV have pledged to come up with volumes to make sure the terminals are operating at full capacity by the end of March 2024. Regardless, it remains unclear where those volumes will come from.
Germany hit only two companies LNG jobs since the complete interruption of Russian gas deliveries in the summer, modest short-term contracts for the next two winter seasons, according to data from ECFR.
The first is a 1 billion cubic meter per year deal between Australia’s Woodside and Uniper, which has since become the subject of Germany’s biggest ever corporate bailout. The second was struck between the National Oil Company of Abu Dhabi and RVE and covers delivery of 137,000 cubic meters in December and unspecified further deliveries in 2023.
Uniper i RVE said they would be able to secure further supplies through their own LNG portfolio, without providing additional details. EnBV said that supply contracts are still being worked out and that it is looking for opportunities in the market.
The busy travel schedule of Habbeck and Chancellor Olaf Scholz points to the difficulty in securing the big long-term deals that could wean Germany off expensive spot power. This year they toured the world in search of additional quantities, including trips to Canada, Qatar and Norway.
“I think Germany did everything it could,” said Giovanni Sgaravatti, a research analyst at the Bruegel think tank. “U LNG market Germany had to start from scratch, which is not easy.”
GRAPHICS: German gas imports https://vvv.reuters.com/graphics/GERMANY–GAS/gdvzkiomvpv/chart.png
[ad_2]
Source link
