High natural gas prices: The energy transition is no longer working

WIf you want to see how Putin’s war is slowing down the German energy transition, you can look to Wolfsburg, for example. In the Volkswagen main plant on the Mittelland Canal, four huge brick chimneys tower into the sky. They belong to the group’s own combined heat and power plant, which not only supplies the VW factories with electricity, but also district heating for Wolfsburg apartments. The smokestacks, which can be seen from afar, have become the symbol of the city.

Actually, VW wanted to convert the power plant from hard coal to significantly less climate-damaging natural gas from the days of the economic miracle. But that has been postponed until 2024, after all, Germany urgently needs to save on natural gas because of the war in Ukraine. The carmaker will therefore continue to burn coal for the time being.

More wind and solar power is not enough

VW can now sell the subscription rights for natural gas that it has already bought in advance for additional proceeds in the three-digit million range. But for climate protection, the deal is bad business. For the time being, the power plant will blow much more CO2 into the air than planned.

A good 500 kilometers south of Wolfsburg in Stuttgart, Georg Stamatelopoulos, CEO of the energy supplier ENBW, is sitting at his desk and reporting on his investment projects. ENBW wants to invest billions in the construction of wind farms and solar parks. But three new gas-fired power plants are also planned. “These are intended to replace existing coal-fired power plants on a one-to-one basis,” says Stamatelopoulos. This reduces CO2 emissions.

Sounds good, but in the meantime it has become uncertain whether the power plants will actually be built. If the Ukraine war hadn’t come, ENBW would have made a definitive investment decision long ago, reports the manager. Now, on the other hand, the plan is to be reviewed again at the end of the year.

The examples from Baden-Württemberg and Lower Saxony show that a central component of Germany’s energy policy project of the century, the energy transition, is crumbling. The energy turnaround has become even more urgent as a result of the war in Ukraine. After all, every new wind turbine and every additional solar module contributes to strengthening the security of supply. In addition, the demand for electricity in Germany is expected to increase by more than a third by 2030. And who knows: maybe even more so if, for example, more citizens than expected now buy an electric heat pump for heating.

On the other hand, however, the enormous increase in gas prices triggered by the war has created a new problem: natural gas is supposed to play a key role in the energy transition. Because the weather-dependent energy sources wind power and photovoltaics supply CO2-free electricity, but not necessarily when it is actually needed. When there is too much wind and sun, wind turbines and solar systems have to be switched off, otherwise there is a risk of overloading the power grid. In times of slack, on the other hand, renewables provide too little energy.

BDI boss: “Don’t press the pause button on climate protection”

When green electricity is scarce, flexible power plants in particular should step in, which are operated with the fossil fuel that is least harmful to the climate and available cheaply for a long time: natural gas. This power plant reserve, which can be switched on when required, will become increasingly important in the medium term. Because the larger the share of renewables in electricity generation, the more susceptible it tends to be to fluctuations, and the more necessary gas-fired power plants become as a buffer when wind and sun weaken.

So far, natural gas has been part of the solution in the energy transition. But now everything is different. The war in Ukraine made gas part of the problem overnight. Because Russia will be absent as a supplier in the future, the natural gas supply has suddenly become unsafe and extremely expensive. Instead, climate-damaging coal-fired power plants continue to be used, as in Wolfsburg, or are reactivated. Even Greenpeace describes this as indispensable. But if more coal instead of gas is used to generate electricity, this will jeopardize Germany’s climate targets.

Thomas Vahlenkamp, ​​energy market expert at the consulting firm McKinsey, speaks of “dramatically changed framework conditions” for the German energy transition. Never before have the challenges in the green reorientation of the German energy system been as great as they are today.