Germany’s half trillion dollar energy base may not be enough | Daily News Byte

Germany’s half trillion dollar energy base may not be enough

 | Daily News Byte

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“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 research director for business cycles and growth at the Kiel Institute for the World Economy.

“Where is the German economy?” If we look at price inflation, it has a high temperature.

When asked about the amount of allocated money, the German Ministry of Finance referred to data on its website. The Economy Ministry, which is in charge of energy security, said it continues to work to diversify supply, adding that LNG and the terminals needed to import it are a key part of that.

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 production to fall by 8.5 percent in 2022, according to industry association VCI, which warns of “huge structural fractures in the German industrial landscape.”

NEAR COVID CASH

The 440 billion euros earmarked for fighting 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 the COVID-19 pandemic, according to IV.

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 LNG import.

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 reviewed KfV data.

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 German industry association BDEV, which 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 of paris job” replacing gas volumes with electricity from the spot market, it had lost its status as a thought leader in clean energy.

“For me, what is really missing in the German strategy is a similar attention to the rapid increase of renewable sources, that now is the time to invest in hydrogen and wind energy infrastructure, to replace gas.”

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