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UKRAINE

EXPLAINED: How Germany could end its dependence on Russian energy

Russia’s invasion of Ukraine has prompted a fierce debate on how Germany can reduce its longstanding reliance on Russian fossil fuels. Here’s what you need to know.

EXPLAINED: How Germany could end its dependence on Russian energy
Electricity pylons and wind turbines in North Rhine-Westphalia. Photo: picture alliance/dpa | Federico Gambarini

In response to Russian aggression last week, German chancellor Olaf Scholz announced a halt to the Nord Stream 2 project – a pipeline which was set to increase gas imports from Russia to up to 70 percent of Germany’s total deliveries. Although the pipeline was not yet in use, and will therefore not immediately impact on energy supply, it serves as a reminder of Germany’s close ties to Russian energy sources.

READ ALSO: Germany halts controversial Nord Stream 2 pipeline

How dependent is Germany on Russia for its energy supply?

According to the Federal Ministry of Economics and Climate Protection (BMWK), Germany imports 35 percent of its oil, 55 percent of its natural gas and 50 percent of its coal from Russia.

In 2021, Germany imported crude oil and natural gas worth €19.4 billion – an increase of 49.5 percent and accounted for 59 percent of all imports from Russia.

READ ALSO: Germany faces up to problematic dependence on Russian gas

Oil imports are mainly processed in refineries into fuel and diesel, but are also used for heating. Many companies also use oil as a raw material and manufacturing lubricant.

A fuel nozzle in the tank opening of a vehicle at a petrol station. Photo: picture alliance/dpa | Sven Hoppe

Gas is mostly used for heating and electricity generation, though industry – especially steel manufacturers – need natural gas for certain processes, as do fertiliser and plastics manufacturers.

Coal is currently mainly burned in coal-fired power plants to produce electricity.

Will supplies last for the rest of the winter?

As the dependence on Russian energy supply is greatest in the gas sector, energy experts have been concerned for weeks about the level of supply to the German and European gas storage facilities.

But, provided that the winter continues to be relatively mild, Germany is expected to get through it safely. According to Federal Economics Minister Robert Habeck (Greens), this is true even in the event that prices for natural gas continue to rise or Russia reduces or completely cuts off gas supplies.

READ ALSO: Germany can do without Russian gas, says minister

Chairman Timm Kehler of the industry association Zukunft Gas told the German Press Association: “We are observing the current supply situation very closely and can say, at least in the short term, that the gas supply for Germany is secure. Heating customers in particular need not worry because of their particularly protected legal position and diversified gas purchases from other countries.”

According to Minister Habeck, further measures have already been initiated for the next winter of 2022/2023, with owners of gas storage facilities being obliged to fill the storage facilities before the start of winter. The corresponding law to secure gas reserves is also already in preparation and should be passed soon.

But in the long term, the Minister Robert Habeck said that Germany’s “hunger” for gas must be reduced as much as possible and that the German government would present a gas reduction plan “very promptly”.

The Minister of Economy also wants to look for new supply partners for oil. Here, however, the situation is less dramatic because of the national oil reserve, which means that oil supplies are currently sufficient to meet demand for another 90 days. “We are on the safe side with oil,” he said.

Habeck also announced that a similar reserve should now also be created for coal. In 2021, Germany still purchased around 18.5 million tonnes of hard coal.

A return to coal and nuclear power?

The war in Ukraine has also prompted a new debate in Germany about a return to a wider use of coal and nuclear power.

The traffic-light coalition government had planned to phase-out coal use in Germany by 2030. But in light of potential energy shortages due to the conflict with Russia, ministers have been vocalising the possibility of a short-term return to coal.

When asked whether the Greens would now have to postpone a coal phase-out by ZDF on Sunday, foreign minister Annalena Baerbock (Greens) said: “Yes, that is the price we too are paying for this war by Mr Putin.” Germany’s solidarity with Ukraine will “also have a price for us here, economically, financially”, she said.

Earlier on Sunday, Federal Economics Minister Robert Habeck also said that he had not ruled out longer operating times for coal and nuclear power plants in Germany.

A sign reading “Access to the nuclear power plant” stands next to a path leading to the entrance building of the Brokdorf nuclear power plant. Photo: picture alliance/dpa | Christian Charisius

However, Habeck also pointed out that the three nuclear power plant operators Eon, EnBW and RWE have already refused to extend their operating lives. The preparations for the shutdowns are so far advanced that the nuclear power plants can only continue to operate with high safety concerns, he said. Nevertheless, his ministry is looking into it, and is considering extending the operating times of German nuclear power plants and also coal-fired power plants.

Short-term cost increases

Last week, the global stock markets reacted sharply to Russia’s military aggression: from Wednesday to Thursday, a megawatt hour of gas on the market became 43 percent more expensive. The gas price ultimately determines the heating costs and, though tenants will not notice the price increases immediately, in a few months or even next year they are likely to see a spike when the service charges are billed.

But Minister Habeck’s assessment is that prices would “level off again in the medium term with a view to the world market”. They are also looking at a wide range of measures to ease the burden of the price increases on low-income families. 

READ ALSO:

Speeding up a move to renewable energy sources

Although it seems that German energy supplies will survive the next winter, Minister Habeck emphasised that it is now necessary to reduce dependence on all three fossil energy sources – oil, gas and coal – as quickly as possible. “Today at the latest, even those who are ‘not so keen’ on climate protection must realise that independence from as many fossil energy sources as possible is a strategic and a security policy issue”, Habeck said.

READ ALSO: Germany to speed up green energy projects in ‘gigantic’ effort

In the medium and long term, however, the focus is on a significantly faster expansion of green electricity from wind and solar power in Germany, which should above all also dampen prices. Habeck said that he wants to remove existing major obstacles to significantly expanding the number of wind and solar energy sites and that the “sleepiness” in approaching expansion must now be overcome.

Could other countries help out?

At the EU level, there is a solidarity mechanism under which EU countries are supposed to share gas reserves in an emergency, especially to protect households from shortages.

The EU Commission is also currently trying to secure additional supplies of gas and liquefied natural gas (LNG) to the EU. According to official information, talks are underway with Azerbaijan, Egypt, Nigeria and Norway, among others.

READ ALSO: Germany eyes new LNG terminals as alternative to Russian gas

The Japanese government has also pledged to redirect surplus liquefied natural gas supplies destined for Japan to Europe andthe Gulf state of Qatar also wants to give up surplus supplies. The Qatari ambassador in Berlin said the country was in principle prepared to make larger gas deliveries to Germany. Overall, the EU Commission says that the EU is on the safe side this winter even in the event of a complete disruption of Russian gas supplies.

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READER QUESTIONS

Reader question: Will retirees benefit from Germany’s energy relief package?

Students, freelancers, benefits claimants and employees are all set to get a financial boost from the German government this year - but have they forgotten about pensioners?

Reader question: Will retirees benefit from Germany's energy relief package?

Record levels of inflation, spiralling energy prices and fears of shortages… the news has been getting worse and worse for consumers in recent months.

At the start the year, the government announced it would be stepping in with numerous measures to help people pay their bills during these difficult months. But as more details of the measures emerged, there appeared to be one major omission: financial support for pensioners.

To find out whether pensioners will benefit from the relief packages, it’s worth taking a look at each of the measures in turn. In most cases, pensions have sadly been left out of the equation, but there are a few things that may help cushion their rising living costs.

READ ALSO:

€9 ticket and fuel tax cut 

We’ll start with the good news: the €9 monthly travel ticket and cut in energy tax on fuel are both designed to benefit everyone, including pensioners.

Unfortunately, the fuel tax cut doesn’t appear to have dampened prices at the pump very much. However, pensioners can enjoy cheap public transport throughout June, July and August with the €9 ticket. 

Überlingen Am Bodensee

Passengers exit a regional train in Baden-Württemberg at Überlingen am Bodensee. Photo: picture alliance/dpa | Felix Kästle

This is obviously great news for retirees who live in cities and parts of the country with good transport networks – but less good news for those who use their car to get around. 

The government’s third mobility measure – an increase in the commuter allowance to 38 cents per kilometre – is also unlikely to benefit the vast majority of pensioners. This measure allows workers who commute long distances to offset some of these costs in their tax returns. 

READ ALSO: Nine of the best day trips from Munich with the €9 ticket

€300 allowance for taxpayers

This flagship energy relief measure – a one-off payment for taxpayers – is another bit of support that pensioners may miss out on. 

The one exception would be pensioners who still work a part-time job to prop up their income.

Even if you’re only working a couple of hours a week, you’ll be entitled to a €300 bonus come September. It’s worth mentioning that this is taxable – but if you don’t earn enough to pay tax, the entirety of the €300 is yours to keep.

However, there may be a way that pensioners can get hold of the money even if they don’t have a regular job. As CDU finance expert Antje Tillmann explains: “It is enough, for example, that a pensioner looks after his grandson for one hour once in 2022 and receives €12 minimum wage from his children in return as part of a mini-job or from self-employment.

“Subsequently, he declares this income in the tax return and gets the energy price lump sum paid out in May 2023.”

READ ALSO: Who gets Germany’s €300 allowance – and when?

One-time heating allowance

As part of its first energy relief package, the government announced that recipients of housing benefit would be eligible for a one-time payment to help with their heating costs.

This is set at €270 for a one-person household and €350 for a two-person household, plus €70 for each additional family member. 

Pensioners who received housing benefit at any time between October 2021 and March 2022 should be eligible for this allowance, as well as people who currently receiving it. 

Pensioner counting money

A German pensioner counts cash in the kitchen. Pensioners who receive social support from the state could be eligible for one-off payouts. Photo: picture alliance/dpa/dpa-tmn | Christin Klose

One-time allowance for benefits recipients

Pensioners who receive Grundsicherung (basic allowance) should be eligible for a one-time lump sum of €200, which will also be paid out to Hartz IV recipients.

Other allowances, such as the €100 Kinderbonus and €100 for people receiving Arbeitslosengeld I, are sadly unlikely to apply to pensioners. 

Scrapping of the EEG levy

The Renewable Energy Act (EEG) levy, which adds about 3.7 cents per kilowatt hour onto consumers’ energy bills, is set to be scrapped on July 1st.

This should benefit anyone with an electricity contract, including pensioners.

Tax relief measures

The government is raising the tax-free allowance for 2022 to €10,347 and raising the value of automatically deductible expenses to €1,200 per year.

Neither of these measures will benefit pensioners who don’t pay tax. 

READ ALSO: KEY POINTS: What Germany’s budget means for you

To sum up: Which measures can pensioners benefit from?

  • €9 ticket (for public transport users)
  • Fuel tax cut (for drivers)
  • Scrapping of EEG levy 

Pensioners claiming welfare could also benefit from:

  • €270 allowance for housing benefit recipients, and
  • €200 allowance for Grundsicherung recipients

Pensioners do seem to be getting a slightly raw deal in comparison to those in employment. However, there are some general measures they may benefit from, and those who are already getting help from the state should also receive a small income boost. 

READ ALSO: EXPLAINED: Germany’s plans to ditch sanctions for the unemployed

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