Germany’s largest natural gas storage chamber extends under a strip of farmland the size of nine football fields in the western part of the country. The bucolic area has become a kind of battleground in Europe’s efforts to defend itself from an approaching gas crisis driven by Russia.
Since last month, the German government has been pumping fuel quickly into the vast underground site of Rehden, hoping to fill it in time for winter, when gas demand rises to heat homes and businesses.
The scene is repeated in storage facilities across the continent, in an energy fair between Europe and Russia that has been on the rise since the Ukrainian invasion of Moscow in February.
In the latest signal that Moscow seems intent on punishing Europe for sanctions and military support in Ukraine, Gazprom, the state-controlled Russian energy giant, reduced the amount of gas it delivers by 60 percent last week. via Nord Stream 1, a service-critical pipeline. Germany and other countries. It is unclear whether acceleration is a precursor to a full cut.
The move added urgency to efforts in Germany, Italy and elsewhere to accumulate gas inventories in a crucial effort to moderate stratospheric prices, reduce Moscow’s political influence and avoid the possibility of shortages this winter. Gazprom’s actions have also forced many countries to relax their restrictions on coal-fired power plants, a major source of greenhouse gases.
“If storage facilities are not filled by the end of the summer, markets will interpret it as a warning of rising prices or even energy shortages,” said Henning Gloystein, director of Eurasia Group, a political venture company.
Gas prices are already extraordinarily high, about six times what they were a year ago. German Finance Minister Christian Lindner has warned that persistently high energy costs have threatened to plunge Europe’s largest economy into an economic crisis, and the government has called on consumers and businesses to save on gas. .
“There is a risk of a very serious economic crisis due to the sharp rise in energy prices, supply chain problems and inflation,” he said. Lindner on public television ZDF Tuesday.
Last year the stage was set for an energy crisis. A cold pot in late winter consumed gas reserves and Gazprom stopped selling any supplies beyond its contractual obligations. Gazprom’s storage facilities in Germany, including Rehde’s huge underground chamber, which the German government took control of in April, were allowed to shrink to almost empty.
To prevent a recurrence last year and to protect itself from supply disruptions, the European Union agreed in May to require member states to fill at least 80 percent of their storage facilities. its capacity before November 1st. So far, the countries are making good progress. towards this goal, with global European storage levels of 55 percent.
Rehden’s giant facility is more than 12 percent full, but Germany, Europe’s largest gas consumer, has reached an overall level of 58 percent, both well above that level. from last year. Other large consumers of gas, such as France and Italy, have stores at similar levels, while Spain has more than 77 percent.
But while storage levels continue to rise, Gazprom’s cuts call into question those targets and threaten a crisis next winter, analysts say.
If Nord Stream were shut down completely, “Europe could run out of gas storage in January,” said Massimo Di Odoardo, vice president of gas research at Wood Mackenzie, a consulting firm.
Gazprom has attributed the cuts to a piece of gas pipeline that was sent for repair and had not returned in time. But European leaders have flatly rejected this argument, and a German regulator said it saw no indication of how a mechanical problem could cause such declines.
“The Russian side’s justification is simply a pretext,” German Economy Minister Robert Habeck said last week. “Obviously, it’s the strategy to unsettle and raise prices.”
The gambito is triumphant. European gas futures have risen by about 50 percent over the past week.
The reduction in supply to the German gas pipeline, which also affected flows to other European countries, such as France, Italy and the Netherlands, shattered any hope left among European leaders of being able to rely on Russian gas, perhaps the most difficult to replace.
“It’s clear now that our contracts with Gazprom are worthless,” said Georg Zachmann, a senior researcher at Bruegel, a research institution in Brussels. Analysts say Moscow will likely continue to use gas for maximum leverage, doing its best to curb Europe’s efforts to fill storage, keep prices high and increase the vulnerability of countries like Germany and Italy to pressure. energy policy.
In recent days, the governments of Germany, the Netherlands and Austria have taken steps to try to save gas, in part by resorting to coal-fired power plants that had been shut down or were scheduled for phasing out. Measures have raised concerns that the European Union’s efforts to achieve zero net greenhouse gas emissions by 2050 will deviate from the path.
Reclaiming coal sends a signal “that is inconsistent with environmental rhetoric in recent years,” said Tim Boersma, director of global natural gas markets at Columbia University’s Center for Global Energy Policy.
The government of the Netherlands continues to resist calls from some sectors to increase production in Groningen, a huge gas field that is closing because production there has caused earthquakes.
In Berlin, Chancellor Olaf Scholz has refused to consider keeping the country’s three nuclear power plants in line. The reactors are expected to close at the end of the year as part of the country’s efforts to stop nuclear power.
Two years ago, Germany decided to phase out coal-fired power plants in 2038, in its mission to be carbon-free in 2045. But last week, Mr. Habeck, who is a member of the Green Party, announced that the government would temporarily reverse these efforts in response to the gas cuts.
The Russia-Ukraine war and the global economy
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A powerful conflict. Russia’s invasion of Ukraine has had a domino effect all over the world, adding to stock market problems. The conflict has caused dizzying spikes in gas prices and product shortages, and has pushed Europe to reconsider its dependence on Russian energy sources.
Russia’s economy is facing a slowdown. While pro-Ukraine countries continue to impose sanctions on the Kremlin in response to its aggression, the Russian economy has so far avoided a crippling collapse thanks to capital controls and rising interest rates. But the head of Russia’s central bank warned that the country is likely to face a severe economic recession as its inventory of imported goods and parts runs out.
Trade barriers are increasing. The invasion of Ukraine has also unleashed a wave of protectionism as governments, desperate to secure goods for their citizens amid scarcity and rising prices, set up new barriers to stopping exports. But restrictions make products more expensive and even more difficult to obtain.
Prices of essential metals are rising. The price of palladium, which is used in car exhaust systems and mobile phones, has skyrocketed amid fears that Russia, the world’s largest metal exporter, could be cut off from global markets. The price of nickel, another key export from Russia, has also risen.
For RWE, a major energy supplier in Germany, the reversal means a three-plant suspension that was supposed to close in September. Plants burn soft coal, or lignite, the dirtiest form of fuel. The company is now struggling to find enough employees to keep the plants running.
The change will require a workforce of “several hundred jobs,” said Vera Bücker, a spokeswoman for RWE. Some of them will be filled by delaying early retirement plans for employees, while others will be new hires for jobs that are expected to be phased out in the first half of 2024, when the regulation expires.
The shift to coal is a challenge for energy suppliers who have focused on the transition to natural gas as a bridge to renewable energy sources. They now have to find new sources of coal and put aside plans to reduce carbon emissions.
“The amount of carbon dioxide we emit will depend on how long it takes for our plants to work,” said Markus Hennes, a spokesman for Steag, which runs several coal-fired power plants in western Germany. “But our emissions will increase. That’s clear.”
More disturbing to some environmentalists, Germany and other European countries are moving rapidly to build terminals to receive liquefied natural gas as an alternative to Russian gas.
On Tuesday, EnBW, a German utility, signed a 20-year deal starting in 2026 with Venture Global, a US supplier of liquefied natural gas. In other words, Germany will import gas until 2046 with this agreement.
“We run the risk of blocking a new era of fossil fuels,” he said. Zachmann de Bruegel.