15.03.2022: Between security of supply, diversification strategy, and climate-neutrality

The Russian attack on Ukraine has brought war back to Europe. It is already clear that this war of aggression will also have medium-term and long-term consequences for Germany and Europe. In addition to being a turning point in security policy, it has prompted policymakers, business, and society to focus on the energy-policy debate surrounding security of supply. It was against this backdrop that high-level guests came together on March 15 at the third Tagesspiegel Debate.Energy Talk, held in collaboration with Uniper, to discuss the topic, “Between security of supply, diversification strategy, and climate-neutrality – What must we learn from the current geopolitical situation?”

At the start of the event, Stephan Weil, the premier of Lower Saxony, made clear in a conversation with Tagesspiegel publisher Stephan-Andreas Casdorff that there would be no change to the goals of a climate-neutral economy and society despite the pandemic and the war, but that security of supply was nevertheless a fundamental and new challenge in the short term. Weil ascribed the greatest importance in terms of security of supply and independence to LNG terminals, as they would be able from as early as 2023 to take the place of a large proportion of natural-gas supplies from Russia, as long as the federal government played its part in relation to planning and approval processes. The premier of Lower Saxony considered that an energy embargo on Russia would not be justifiable, because of its devastating impact on private households and energy-intensive sectors of the economy.

Next, in a contribution classifying the situation in academic terms, Dr. Jacopo Maria Pepe of the German Institute for International and Security Affairs asserted that energy policy would have to be fundamentally reevaluated. In the present crisis situation, Germany, as an energy-importing country, would have to make a move toward future energy-independence from Russia and act like a market economy at the same time, while not losing sight of its climate-protection targets. Pepe also agreed with the premier with regard to developing LNG terminals to secure supplies on the grounds that “gas remains important for the changeover period during the energy transition.” However, the academic expressed reservations about whether traditional energy sources could be replaced with LNG in the short-to-medium term because the import infrastructure was still limited. In order to reconcile security of supply with climate-neutrality, the German federal government would have to prioritize and promote a ramping-up of the hydrogen economy, in particular. Pepe also demanded that German energy policy should in future be focused more strongly on Europe because the war in Ukraine marked the birth of a fragmented world order in which the geopolitical dimension of the energy transformation had become irrevocably evident.

In the panel discussion that followed, all the participants agreed that the top priority currently was security of supply and that “an immediate embargo on Russia is not justifiable,” because we are heavily dependent on coal, oil, and gas from Russia, as Parliamentary State Secretary Oliver Krischer from the Federal Ministry for Economic Affairs and Climate Action put it. The participants in the panel discussion also stressed that the unprecedented, far-reaching sanctions on Russia were more expedient in the current situation than an energy embargo would be. Holger Lösch from the Federation of German Industries stressed how hard even the present situation was for industry, because “companies are facing huge problems even before the embargo – the price of electricity has gone through the roof.”
In the context of security of supply, both State Secretary Krischer and Uniper CEO Prof. Dr. Klaus-Dieter Maubach spoke against extending the lifespan of nuclear power plants, on the grounds that this would be technologically difficult and would not make economic sense. Conversely, Maubach spoke in favor of an open discussion with regard to extending the lifetime of coal-fired power plants. He asserted that the industry was working with the federal government to guarantee security of supply in the future too, noting that his company had, for example, resumed planning for the LNG terminal in Wilhelmshaven. However, Dr. Kirsten Westphal of the H2Global Foundation warned that the current crisis should not be a reason to go back to fossil fuels. She then demanded a “recalibration of transformational steps” in order to accomplish the energy transition.

Next, Maubach made clear that the energy crisis also showed what specific steps were necessary to accelerate the transformation and diversify energy policy. The key energy source here was identified as being the development of a hydrogen economy, which Lösch said could present a way out of our current dependencies. Against this background, Westphal demanded that Europe establish itself in the crisis as a leading market for hydrogen. Here, she said, they would have to rely on fracked gas from the United States, along with LNG terminals, which would have to be H2-ready.

In this context, Prof. Dr. Klaus-Dieter Maubach and Prof. Dr. Veronika Grimm called for greater pragmatism with regard to establishing and supporting a hydrogen economy. Excessively ambitious targets for a hydrogen economy that was intended from its inception to be climate-neutral would block market forces, Grimm said. Instead, she added, it was necessary to develop the infrastructure consistently and, as a transitional measure, to support yellow and blue hydrogen too. Parliamentary State Secretary Krischer added that, at present, the stringent European aid regulations in particular would slow down the development of a hydrogen economy and that something would therefore have to happen at the European level above all.

The discussion demonstrated that the war in Ukraine is a turning point in energy policy, where it is necessary to reconcile climate-neutrality with security of supply. Even if independence from Russian natural gas cannot be achieved in the short term, cooperation at the European level, the diversification of energy sources, the expansion of renewables, getting a hydrogen market up and running, and the pragmatism to accompany all this will be important in the coming years and will become a driver of transformation in Germany and Europe.