Coal, LNG and whatever it takes: the ‘Scholz plan’ revolutionizes the energy scene

From expanding your liquefied natural gas (LNG) facilities to extending the useful life of your coal or nuclear power plants. Germany is ready to do anything to reduce its energy dependence on Russia, even though that supposes a challenge for the country in the face of the ‘taboo’ that dirty energies represent until now. “The events of the last few days and weeks have shown us that a responsible and forward-looking energy policy is not only crucial for our economy and our climate, but talso for our safety“, acknowledged the German chancellor, Olaf Scholzon Sunday in a historic speech in which he announced a change in energy policy, in addition to an increase in the defense budget.

In the midst of reprisals against the Russian economy, which the West seeks to stifle to curb the intentions of Vladimir Putin, Germany is a key country due to the high volume of energy, especially natural gas, which it imports from Russia. The deficit is due to its high demand compared to its low domestic production. The conflict in Ukraine has already pushed up energy prices, but, in addition, Western sanctions could jeopardize supply in Germany, just when the leading economy in the Euro zone is already facing risk of economic recession in the first quarter due to the effects of the latest wave of Covid, according to the Bundesbank. However, the suspension of the certification of the Nord Stream 2 gas pipeline already showed Scholz’s determination, which is now confirmed by his energy investment plan.

Specifically, Germany will increase natural gas reserves -by 2,000 million cubic meters– and will purchase additional gas on world markets – in consultation with the EU. It currently has a significant storage capacity, the largest in the EU, of around 23 billion cubic meters, according to data from Gas Infrastructure Europe. However, its reserves are now below 30%. To increase reserve capacity, Scholz also announced that they will accelerate the construction of two liquefied natural gas (LNG) terminals in the cities of Brunsbüttel and Wilhelmshaven.

The country does not currently have any LNG terminals, but projects in both cities are already in the works. In back of Brunsbüttel is the company RWE -the second producer of energy- and German LNG Terminal -a joint venture of the Dutch Gasunie and Vopak LNG Holding and the German Oiltanking-. RWE rebounded this Monday more than 3% in the stock market and in the year accumulates 15%, while vopakwhich is listed on the Amsterdam Stock Exchange, achieved more than 5.5%.

For its part, the project Wilhelmshaven It was one of the bets Uniper, the energy company based in Düsseldorf (Germany), and is already considering reactivating these works. Despite the boost that this new project can bring, the company left this Monday more than 6% of its stock market value and the slump exceeds 30% since January, after it sank last week due to its exposure to Russia and its participation in the Nord Stream 2 gas pipeline.

But these investments do not derail the German commitment to renewable energy. “Our current short-term needs can dovetail with what is already needed in the long term for the transformation to succeed. An LNG terminal that receives gas today can be used tomorrow to import green hydrogen“, highlighted Scholz. Germany is not the only country pressured to reduce foreign energy dependence, which gives wings to the renewable sector, which suffered a strong punishment in the stock market in recent months due to the doubts about the viability of the business.

Thus, the German wind turbine manufacturer, Siemens Gamesarose 14%, while its parent Siemens Energy -dedicated to gas and oil- rebounded 10%. Also, the Danish vestas An advance of 15% in its price was noted this Monday, while another competitor in the sector, Nordexgained 13.5%. Orsted, the world’s largest developer of offshore wind farms, also gained more than 10%. Other renewable energy companies, such as solar, were also boosted on the stock market. It is the case of the Spanish Solariawhich gained 10.8%.

The Greens do not rule out nuclear power or coal

However, renewable energies are not enough to guarantee supply because their capacity cannot be accumulated and the circumstances to generate them do not always exist. Therefore, the combined cyclesand the fossil energy that makes them work, or the nuclear energy are still needed. The current energy crisis occurs in full nuclear blackout in Germany and in on track to be carbon neutral. Since 2011, following the 2011 Fukushima reactor accident in Japan, Germany accelerated the closure of its plants and in 2021 Brockdorf, Gundremingen C and Gröhnde ceased operations. The three that remain operational -Isar 2, Emsland and Neckarwestheim 2- plan to do so by the end of this exercise, although the calendar could be reversed.

The three plants are owned by German energy firms E.ON, RWE and EnBW, respectively. the energetic EON this Monday it gained 1.7% on the stock market, while in the year it remains negative due to its exposure to the Nord Stream 1 gas pipeline. For now it remains operational and the German company has rejected pressure to close it as part of the sanctions for invading Ukraine. For its part, EnBW maintains a more stable price with an increase of close to 1.6% in the year.

The energy ‘turn’ in Germany occurs precisely when the environmentalist party The Greens are part of the German government for the first time -in coalition with the Social Democrats (SPD) and Liberals (FDP)- and are in charge of five ministries, including Economy and Climate or Environment. But even they also recognize the possibility of extending the useful life of their nuclear plants to ensure the country’s energy supply and its security. “It is part of the tasks of my ministry to answer this question… I would not reject it on ideological grounds,” said Robert Habeck, deputy chancellor and minister for the economy and climate protection.

Habeck was also willing to allow coal-fired power plants to run longer than planned. The goal is that by 2030, 80% of the energy consumed in the country comes from renewable sources. However, the energy plan announced by Scholz also includes the expansion of coal reserves.