What could replace Russian gas in the German and European energy supply?

Reflections on a statement by the Leopoldina National Academy of Sciences

Was passiert, wenn Russland sich verweigert, weiter Energie nach Deutschland auszuführen? 30% der Primärenergie die Deutschland eingeführt - darunter die Hälfte alles Erdgases - kommt aus Russland. Das Dilemma ist schwierig zu lösen, egal ob der Lieferungsstopp einen deutschen Beschluss vertritt - oder ob er sich ergibt aus Vergeltungsmaßnahmen, die die Russen innerhalb eines wirtschaftlichen Krieges einsetzen.

Dieses Blog ist hauptsächlich eine Stellungnahme gegenüber Argumente, die in einem vom Leopoldina Institut veröffentlichten Papier erstmals geäußert wurden. In anderen Worten ist es eine britische Antwort zu einem deutschen Perspektiv.

What would happen to Germany if it stopped importing energy from Russia? Germany gets about 30% of its primary energy, including half its gas, from Russia. Whether Germany calls a stop itself, or whether Russia does, as retaliation in the economic war, the scale of imports shows the importance of the question.

Several economic studies published this month indicate that such a stop would lead to a German recession. The differences among the studies, as explained by Adam Tooze, are mainly about how deep such a recession might be.

Before the economic impact can be assessed, it is necessary to understand the short-term alternatives Germany might have to Russian energy. This question was examined for natural gas (“Erdgas”) in a statement published on 8 March by the Leopoldina National Academy of Sciences.[1]

The statement’s overall conclusion was that even a short-term stop on natural gas supplies from Russia to Germany would be “handhabbar”, that is, “handleable” or “manageable”.[2]

At first sight, this is a striking conclusion: after all, if it is manageable, why not just do it? “Manageable”, though, is a word with many shades of meaning. There is no doubt that various practical difficulties and qualifications identified in the statement mean that it is not a call to “just do it”. One of them, needing no translation, is that the conclusion is “theoretisch”.

Yet even if a short-term stop to Russian gas is only theoretically manageable, it is still an important conclusion. How does the statement reach it? The argument it makes is heavily quantitative. The graph below is our attempt to summarise it.

The graph has two parts. The two blocks on the left-hand side show imports of natural gas into the EU27 in 2019, from Russia (the first block) and elsewhere (the second block). Both blocks are divided between imports to Germany (orange) and imports to the other 26 EU member countries (blue).

The single block on the right-hand side (blue) shows the amount of spare capacity in 2020 in the EU27’s LNG (liquid natural gas) plants, measured by their capacity to convert the liquid back into a gaseous state. This estimate of spare capacity assumes that supplies of Russian LNG have stopped.

Before looking at the numbers, this presentation shows the two key features of Leopoldina’s statement. The first is that the essence of the argument is about the extent to which spare LNG capacity across the EU could offset the loss of Russian gas.

The second is that the problem has to be set in an EU-wide context because Germany itself has no spare LNG capacity – for the simple reason that it has no LNG plants of its own at all.  If LNG is to be a response for Germany to a short-term stop, it can only be part of an EU-wide response.

Natural gas imports (2019) and unused LNG capacity (2020): TerraWatt hours (TWh)[3]

Turning to the numbers, of the 1,768 TWh of gas imported from Russia by the EU27 imported in 2019, 450 TWh (25%) went to Germany. This Russian gas made up 51% of Germany’s total gas imports (882 TWh). The 1,318 TWh of Russian gas imported by the other EU26 made up 39% of their total gas imports (3,395 TWh).

One point not shown in the graph is that 28% of all gas imports to the EU26, and 12% of its gas imports from Russia, took the form of LNG. German gas was by contrast entirely delivered by pipeline.

The key conclusion can be seen in the block on the right-hand side: full utilisation of the EU’s LNG capacity would in theory mean an increased supply of 1.073 TWh of gas. Compared with the left-hand block, this is just over 60% of the 1,768 TWh imported from Russia in 2019, leaving an EU-wide shortfall of 695 TWh.

At this point, the statement goes into detail about the use that is made of gas in Germany, drawing the distinction between the gas used to generate electricity and the gas used to generate heat. While the latter accounts for almost two-thirds of all gas used in Germany, there are few short-term substitutes, especially for the warming of homes (aside perhaps from improved energy efficiency).

By contrast, the gas used to generate electricity in Germany could more easily be replaced by coal and renewables. That is important because the gas used for generation (174TWh according to the statement) is equal to 25% of the EU-wide shortfall (695 TWh). Since a quarter of Russian gas to the EU27 is going to Germany, 25% is arguably its ‘fair’ share of the shortfall.

Given this, there is now enough to see how the judgement that a short-term stop to Russian gas is manageable can be justified. Three conditions have to be met: that the EU’s LNG terminals work at full capacity; that Germany takes 25% of the resulting new supply; and that Germany covers its (25%) share of EU-wide shortfall by replacing the gas used to generate electricity with other sources of energy.

In practice, there are numerous obstacles to what in theory is manageable. The big question, about where the LNG needed to replace Russian gas might come from, is not discussed in the statement. The statement does, however, point to problems with the gas distribution network within Europe, which limits how far Russian gas can be fully replaced by gas derived from LNG.

It also considers a set of issues to do with gas storage in Germany, including the level of reserves (close to the bottom end of the range in early 2022) and the risks facing storage operators at a time of high but volatile prices. This is one instance of a wider point about the need for greater involvement by the state at a time of crisis.

The statement also notes that if there is a shortage of gas in Germany, it is going to be German industry whose usage is rationed.

Formidable as the practical obstacles are, the value of the statement lies in showing the size of the prize on offer if they can be overcome.

By way of conclusion, the statement is striking, at least to British eyes, in what it shows about Germany’s situation and outlook.

First, while Germany has a choice about who it is dependent upon for energy, it does not have a choice about whether it is dependent. A shift from Russian gas to LNG turns Germany’s dependence westward, especially towards Spain and France, where some two-thirds of the EU’s regasification capacity lies. As a result, Germany is now more dependent on the rest of the EU.

Second, the statement mentions Turkey as a neighbouring, non-EU country with significant LNG capacity, comparable in fact to that of France. The report from which the statement draws its LNG data includes another European country whose LNG capacity within Europe is second only to that of Spain. This country though, which is of course the UK, is not mentioned by Leopoldina. Thanks to the gas interconnectors, gas flows from the UK to the EU via pipes, just as it does from Russia.

Reports in recent days have talked about the US upping its supplies of LNG to the EU. The amount mentioned for 2022 (some 15bn m3) is only about one fifth of what is needed to get EU LNG regasification plants working at full tilt. At least in theory, the UK’s role in helping the EU overcome a loss of Russian gas is not restricted to LNG but could include North Sea gas landed in Britain as well.

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[1]               Leopoldina Nationale Akademie der Wissenschaft, „Wie sich russisches Erdgas in der deutschen und europäischen Energieversorgung ersetzen lässt“ (ad-hoc Stellungnahme), 8 March 2022

[2]               Full quote: „Die Stellungnahme kommt zu dem Schluss, dass auch ein kurzfristiger Lieferstopp von russischem Gas für die deutsche Volkswirtschaft handhabbar wäre“.

[3]               Source: all numbers taken directly from the paper except for 1,073 which is derived from the source cited in the paper (International Group of Liquefied Natural Gas Importers, Annual Report 2021, Addition der Kapazitäten EU27, S. 55-56) using (as per the paper) a conversion factor 13.9 TWh per millon tonnes of gas. The corresponding figure quoted in the paper is “around 1100”).