Germany Rations Gas Amid Russian Cuts, Mandates Return To Coal For Electricity Production

German Vice Chancellor and Economy Minister Robert Habeck  said Sunday that the country will limit the use of natural gas for electricity production amid concerns about possible shortages caused by a cut in supplies from Russia.

As a member of the environmentalist Green Party, Habeck pushed through legislation in April to raise Germany’s energy target to 80% renewables. He is also an opponent of nuclear energy.

Habeck said that Germany will try to compensate for the move by increasing the burning of coal, a more polluting fossil fuel.

 “That’s bitter, but it’s simply necessary in this situation to lower gas usage,”

The decision comes just days after Russian gas company Gazprom announced that it was sharply reducing supplies through the Nord Stream 1 pipeline for technical reasons, but which Habeck said appeared to be politically motivated.

“It’s obvious that (Russian President Vladimir) Putin’s strategy is to unsettle us by driving up the price and dividing us,” Habeck said.

“We won’t let that happen.”

Habeck’s Press Release on Reducing Natural Gas Consumption.

Gas Reduction in Electricity Sector

“The situation on the gas market has deteriorated in recent days. The missing quantities can still be replaced, and the gas storage tanks are still being filled, albeit at high prices. Security of supply is currently guaranteed. But the situation is serious. We are therefore further strengthening precautions and taking additional measures to reduce gas consumption. This means that gas consumption must continue to fall, so more gas must be stored in storage, otherwise things will get really tight in winter. We will now take the next steps. For months we have been in the process of sharpening tools, creating new ones and removing existing obstacles. We are accelerating the expansion of renewable energies in an unprecedented way, we are pushing through the storage of gas and driving the expansion of LNG terminals and energy efficiency measures. The urgency of these tasks determines our ongoing work. Now we’re going to pull out and use another set of tools. We will reduce gas consumption in the electricity sector and in industry and force storage tanks to be filled. Depending on the situation, we will take further measures.”

“With the law, we are setting up a gas replacement reserve on demand. And I can already say: We will call off the gas replacement reserve as soon as the law comes into force. That means, to be honest, more coal-fired power plants for a transitional period. That’s bitter, but in this situation it’s almost necessary to reduce gas consumption. We must and we will do everything we can to store as much gas as possible in summer and autumn. The gas storage tanks must be full in winter. That has top priority,” said Habeck.

Rapid Expansion of LNG Infrastructure

Germany has not yet had a port where liquid gas can be landed. However, this is necessary in order to strengthen the gas supply from non-Russian sources and thus become independent of Russian imports. The federal government is therefore pushing ahead with the construction of so-called floating LNG terminals. First, it has secured four special ships, so-called FSRU , on which liquid gas is converted back into gas. Secondly, with on LNG Acceleration Act, it has created the legal prerequisites to accelerate the construction of the necessary connections on land so that two of the four FSRU ships can go into operation in winter and thus LNG can be fed into the German gas supply network. Everyone involved is working hard on this.

As MishTalk’s Mike Shedlock notes, those are two of seven points of Habeck’s plan.

He notes storage tanks are only 56% full. 

Not to worry, that’s ahead of a year ago. But a year ago Germany was getting 100% of the gas it wanted from Russia. Now it’s only getting 40% of the gas it was getting a year ago.

That means it will take 2.5 times as long to fill up the tanks, thus the need to ration natural gas and use coal.

[ZH: Maybe Trump was right after all]

Transitional to What and When?

Well, don’t worry. This is only temporary. 

Heaven only knows until when. Meanwhile, Germany is rushing to build floating LNG terminals. 

That gas will come from where? 

20% of US LNG Capacity Went Offline on June 8

On June 8, an explosion at the Freeport LNG facility in Texas knocked out 20% of US LNG production.

The outage sent US gas futures down 18% from the price a day before the fire.  European gas prices shot up by over 60%.

Since then, US prices have fallen nearly 60 cents to $6.71.

[ZH: The chart below compares ‘oil barrel equivalent’ levels for EU and US NatGas relative to WTI Crude]

Spotlight on Sanctions

Sanctions on Russia has left equipment key for the functioning of the Nord Stream gas pipeline stuck abroad, signaling shipments via the crucial route to Germany may be curbed for some time https://t.co/8jiaC0EO9b

— Bloomberg (@business) June 14, 2022

No Parts, No Gas

3/ The word “sanctions” is not used, but @Gazprom‘s reasoning indirectly links the situation to @Siemens May 12 announcement that the company will wind down its operations in Russia. https://t.co/5kcZmDgoIC

— Alexander Gabuev 陳寒士 (@AlexGabuev) June 14, 2022

Global Natural Gas Flow

Yet again, I keep returning to the following picture. 

Global map from Nations Online Project, annotations by Mish

Instead of getting natural gas from hundreds of miles away over existing pipelines we compress natural gas in the US then ship it 4,700 miles away Europe.

Meanwhile, Russia fearing eventual European cutoff is building new pipelines to China.

De-globalization is underway. A key ramification is higher inflation.

For further discussion, please see De-Globalization: New Supply Chains Are Inefficient and Will Drive Up Inflation

We have economic illiterates running the country and running the Fed. The average Joe is getting killed.

Dear President Biden, the above charts speak for themselves. If you want to lower inflation, stop the sanctions.

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