German chancellor Olaf Scholz has put the certification process for the contentious Russian-German natural gas pipeline Nord Stream 2 on hold, after Russian president Vladimir Putin formally recognised two breakaway regions in eastern Ukraine. Scholz ordered the economy ministry to withdraw a report on German supply security, thus halting the certification process at the Federal Network Agency (BNetzA).
“The situation today is fundamentally different and therefore, in view of the latest developments, we must reassess this situation, also with regard to Nord Stream 2,” Scholz said at a press conference in Berlin.
Asked about what Russia would have to do to ensure the continuation of the project, the chancellor told public broadcaster ARD that “we‘re a long way from that now.” He said that no one could make a prediction about whether the pipeline would ever start operations. “In any case, we are now in a situation where nobody should bet on it.”
In recent months, Scholz had either spoken out against linking the operating permit to efforts to de-escalate the Ukraine crisis – calling it a “private sector project” – or simply avoided to even mention the name of the pipeline, for example during a press conference with U.S. president Joe Biden.
Nord Stream 2 has divided opinion across Europe for years
The Nord Stream 2 pipeline would be an additional direct connection between the gas supply systems of Germany and Russia, but it has divided opinions in Europe and beyond for years. Opponents criticise Nord Stream 2 on environmental, geopolitical and security grounds, while proponents argue the pipeline is a commercial investment that is key to Europe’s supply security. The link’s construction in the Baltic Sea is completed, but the certification process had been put on hold in November 2021 by BNetzA over legal details.
German government to re-assess security of supply
Scholz asked the economy and climate ministry (BMWK) to withdraw the existing analysis of Germany’s supply security. “This may sound technical, but it is the necessary administrative step so that no certification of the pipeline can now take place,” said Scholz. “And without this certification, Nord Stream 2 cannot go into operation.” The report on supply security would now be reworked by the economy ministry.
“This will certainly take some time,” said Scholz. The chancellor did not say what conditions would have to be met for the certification process to restart.
Germany’s previous government in October 2021 said Nord Stream 2 would not endanger gas supply security in Germany or the EU and passed its report on to the grid agency, so it could continue the certification process.
“My ministry this morning told the Federal Network Agency that the security of supply report, which makes up one part of the approval of the Nord Stream 2 pipeline, will be withdrawn,” vice chancellor and minister for economy and climate Robert Habeck (Green Party) said at a separate press conference. The approval for Nord Stream 2 is connected to two requirements: the certification by the BNetzA and the examination of supply security, he said. “The supply security examination was completed by the previous government in October 2021 and found that Nord Stream 2 did not endanger Germany’s supply security. I am of the opinion that the geopolitical situation but also the situation on the gas markets are making a re-assessment a must. This step has been prepared in detail in the past months and weeks, so that today the security of supply report was retracted.” The report is a condition for the approval of the pipeline and it will now be redone and Nord Stream 2 cannot be approved before this has happened, said the minister.
Fossil fuel phase out
“The one-sidedness of dependence on one supplier, who has also proven to be unreliable, must be overcome. And this must be examined in the security of supply report,” said Habeck. “The overall goal should be to phase out fossil fuels, including natural gas, as quickly as possible, and until then, political oversight of supply security in the gas sector must be strengthened.”
NGO Environmental Action Germany (DUH) said the decision to halt Nord Stream 2’s approval would not only benefit Europe’s security but also its climate targets. The pipeline is “Europe’s largest fossil fuel project” that would cause 100 million tonnes of CO2 emissions per year, DUH said. The economy ministry now had to quickly present a plan how natural gas use could be reduced altogether, it added.
About half of German gas imports are from Russia
In the midst of the energy transition, Germany and the EU still rely heavily on imports of fossil fuels, as domestic resources have begun to deplete or their extraction is becoming too costly. Rising European energy prices in 2021/2022 and tensions in countries that are key to the continent’s energy supply have put the question of import dependence and how the switch to renewables could bring some relief front and centre of the debate.
Gas covered more than a quarter of Germany’s primary energy use in 2021, making it the country’s second most important energy source. Germany is among the world’s biggest natural gas importers and around 95 percent of its gas consumption is met by imports.
Shift to renewables
“About half comes from Russian imports,” said chancellor Scholz in Berlin, and added that the country had already started to reduce its dependence on gas by deciding to become climate neutral in 25 years. Germany will shift its consumption to renewable electricity-based supply and “massively expand” wind and solar power, he added.
German climate policy also has the aim of making the country geo-strategically independent, said economy minister Habeck. “The more energy we can produce in Germany without being dependent on imports, the more sovereignty we have in our foreign and security policy. […] We will have to fight to reduce our dependence on natural gas wherever possible.”
However, the minister highlighted that Germany would need gas power capacity for some time to guarantee supply security in certain moments, when there is not enough renewable electricity. “We will have to combine the addition of renewable capacity with the creation of a capacity structure that can close the gaps when the sun doesn’t shine and the wind doesn’t blow.”
Germany can get through winter without Russian gas
Economic policy think tank Bruegel said the EU could likely weather a wider disruption to its gas imports in the short run, even though any drastic change to the current reliance on Russia would likely mean demand must be reduced accordingly.
While ongoing tensions with Ukraine have raised fears that Russia could cut off gas to Europe in the event of an all-out war, the German government is confident that the country’s gas supply is secure for the time being – with one major caveat, Spiegel reports citing government sources. Even if Russia’s natural gas supply stopped completely, Germany could still get through the rest of the current heating season without having to mobilise additional gas, it stresses. As long as temperatures remain on par with the long-term average, Germany’s remaining reserves in storage facilities and the liquid gas that can be bought on the spot market and via short-term contracts would be sufficient to ensure supply.
“The potential to supply Germany via LNG over the winter is given. Germany is secure in terms of supply,” minister Habeck said.
A prolonged cold snap, however, would nullify this scenario. The current supply situation on the German and European gas markets is very tight. Russia’s main exporter, state-owned Gazprom, delivered nearly 130 billion cubic metres of gas to Europe in 2021, around 31 percent less than the previous five-year average, according to data from information service S&P Global Platts. Deliveries at the beginning of 2022 fell slightly. While Gazprom is continuing to fulfil its long-term supply contracts, it is not selling any additional gas on the spot market, unlike in previous years. Germany’s current gas reserves are at 31 percent capacity, enough for 75 terawatt hours, writes Spiegel.