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Proactive Energy Security

As Germany goes, so goes the EU. As the bloc’s largest economy, Germany has an outsized impact on the EU at every level—politically, socially, financially, etc. That is why Germany’s reliance on Russian gas has been so worrisome. Before Russia’s invasion of Ukraine, Germany was extremely reliant on Russian gas, importing more than half of its gas from its Eastern neighbour. Russian gas was supposed to be a stopgap measure, one that would allow Germany to successfully transition to greener, renewable energy throughout the country without continuing to burn the worst fossil fuels like coal during the transition. So, when Russia invaded Ukraine and subsequently began reducing its exported gas to the EU in response to EU sanctions, Germany and other reliant nations were left without much recourse. Or that was Russia’s plan, at least.

Instead of fracturing the bloc, Russia’s energy influence over it seems to be waning. That said, a very difficult winter is coming, and some experts predict that it will result in 1-2 years of economic hardship for the bloc. Germany, for its part, is racing to fill its underground gas storage units before the winter. With these strategic reserves full, the country and its citizens are less exposed to Russian gas supply manipulation. Fewer supply disruptions mean more stability, and there is nothing worse than an unstable energy supply during a cold winter. That was, after all, Russia’s intent. Western sanctions have made things painful in Russia since February; Moscow, of course, wants to return the favour. The issue for Moscow is that while Western sanctions attack Russia’s economy from all fronts, Russia’s influence is mostly limited to energy supply (and to some degree as an export market). As one analyst put it, Russia is attempting to burn bridges while there are still bridges left to burn. Before we know it, Russia will be entirely isolated from the West, yet again.

The world burns

As the bridges burn, Germany has not waited to get its affairs in order. As previously mentioned, the nation has rushed to fill its storage facilities well ahead of schedule. It has been able to do so by increasing its gas supply from Norway, the Netherlands, and other countries. They have been able to do this because there has been falling demand due to soaring global energy prices. It has been costly, but it has been worth it to ensure energy security for the foreseeable future. The latest estimates now show that German gas consumption from Russia fell all the way to 9.5% in August. In August 2021, that number was 60%! Norway now supplies 38% of German gas, and the Netherlands supplies 24%. Because of its proactive measures, it is looking less and less likely that there will be any sort of energy rationing in Germany this winter. Likewise, the EU’s overall storage levels are at an average of over 80% full, while Germany’s underground storage is 84% full ahead of winter.

Still, experts expect that Germany will have to keep demand down to avoid exhausting its reserves. If there is an unexpectedly cold period, that could drain reserves quite quickly. The only hedge against such an outcome would be making sure that people and businesses are consuming less, and that there are measures in place to curb or reduce consumption. Winter has yet to come, but hopefully, Russia will not be too relevant come the colder months.