Last week, the US and the EU hit Russia with a new sanctions regime in order to punish its continued meddling in destabilizing Eastern Ukraine. The economic restrictions are dubbed ‘Stage Three’ sanctions, indicating the increased level of severity meant to further ratchet up costs to the Russian economy. The sanctions now target Russian banking, defense, and energy sectors.
As for the latter, “both the EU and the United States will ban export of technologies to Russia for deep-water, Arctic or shale oil drilling,” The Guardian newspaper writes. Interestingly, the article also notes that “sanctions from the EU, which does far more trade with Russia, will be reviewed in three months.” The EU compared to the US has much more at stake – check out data (Eurostat, 2013) on imports, exports, and trade volumes between Russia and the EU in an interactive graphic provided by Der Spiegel.
In addition, given that about 30 per cent of the EU’s overall gas consumption – 161.5 bcm out of 541 bcm, according to CIEP citing Gazprom 2013 export data – is covered by Russian natural gas imports, it is no wonder that the EU may want to reconsider its ‘tough’ stance before the winter. The EU cannot have an interest in joining the Russian Bear in what might be called “economic hibernation” due to severe repercussions in the energy realm on both sides. A 2006 Russian natural gas shutoff left many Europeans without heating fuel during a bitter cold winter.
As expected, Russia responded defiantly to the new sweeping EU/US sanctions, threatening to increase energy prices in a statement by the Russian foreign ministry cited by EUobserver:
“Obsessed with sanctions, Brussels is itself creating barriers for further cooperation in such a key sector as energy industry. (…) It is a senseless and irresponsible step, which will inevitably cause European energy market prices to rise.”
In light of this threat a timely study by experts from the renowned German Frauenhofer Institute (IWES), commissioned by the German Green Party faction in the German parliament, explains how – along with a realistic time frame – Germany could completely wean itself off Russian natural gas imports. The study titled in German “Erdgassubstitution durch eine forcierte Energiewende” (“How a turbo-charged ‘Energiewende’ can replace natural gas imports”) concludes that Germany could be independent of Russian gas imports by 2030 at the earliest.
At that point of time, Germany could cut down on Russian gas imports entirely, which is equivalent to about 400 TWh of German energy consumption per year based on 2013 figures. The authors go on to explain that Germany consumed about 900 terawatt-hours (TWh) – equivalent to about 102,600 megawatts (MW) by doing a rough conversion to megawatts – in 2013 with 96 TWh thereof attributed to its own domestic production. Charts show that Germany imported 1,040 TWh – including natural gas transits – and re-exported 226 TWh, leaving it with a net natural gas import balance of 814 TWh in 2013. Russian natural gas accounted for 38.7 per cent of these imports.
However, in order to significantly reduce dependence on natural gas imports ahead of 2050 – the legislative goal as outlined in the Renewable Energy Sources Act (EEG) 2.0 – an initial investment of 300 billion Euros is required now through 2028 in order to reap the benefits from overall energy system procurement savings through 2050, which then would make this gigantic endeavor profitable, the authors claim. Moreover, the initial investment has to be accompanied by general energy efficiency measures such as the reduction of energy consumption through energy efficiency of buildings, geothermal heat and energy, power-to-heat, conversion of electricity into synthetic fuel (power-to-gas), the use of biomethane as a natural gas substitute, biomass energy, and solar. By implementing such a holistic view of the power generation and heating sectors, the above measures could already yield a substantial reduction in natural gas imports by 2025.
The following graphic nicely illustrates the path – as outlined by the experts of the German Fraunhofer Institute – to a reduction in natural gas imports by turbo-charging as well as optimizing the ‘Energiewende’:
Source: Fraunhofer IWES
It is important to note that the above-described scenario does not include the potential of increased domestic natural gas production through ‘fracking’ or future direct German LNG imports from global markets via a yet-to-be built import terminal in Wilhelmshaven.
Lastly, given the enormous costs and relatively long time frame to accomplish total energy independence from Russia – probably neither smart nor cost-effectively achievable to begin with – it would not even be a stunning turn of events if ‘clean’ coal became down the road the big ‘energy savior’ in Europe. So, get ready US coal for a European Energy Emergency! Der Spiegel cites estimates that show coal helping Germany to wean itself off Russian gas in about ten years. Remember, we live in a very volatile world and just like geopolitical change, governments along with their policies change in response. Stay tuned….
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