Germany is celebrating its progress in managing to reduce its reliance on Russian gas. Russia, which used to account for more than half of the country’s natural gas supply, hasn’t delivered any gas to Germany since the end of August.  

Germany is moving to replace all Russian energy imports, most notably natural gas, by as soon as mid-2024, a Herculean effort given Europe's top economy depends on Russia for the fuel to power its industry. Half of Germany's 41.5 million households use natural gas for heating while industry accounts for roughly a third of national demand.

Germany’s power utilities such as Uniper and RWE are driving gas demand. Uniper’s power plants delivered about 10GW in 2021, of which 3.3GW was natural gas generated. RWE has about 41GW of installed capacity which includes 14GW of natural gas. In 2022 natural gas accounted for 14% or 77.5TWh of Germany’s power generation.

Germany embarked on efforts to store gas and diversify its supplies.  It successfully filled its gas storage facilities to 98% above the set target to reach 95% by November 2022. In a bold move the country started building liquefied natural gas terminals, the first the “Hoegh Esperanza”, a floating LNG terminal was inaugurated in December 2022. Not only was the FLNG constructed at unprecedented speed, but it is also a major step in Berlin’s quest to live without Russia gas in the not-so-distant future.

In all, the two government leased FLNG terminals and a private one in the Baltic Sea, will allow for extra LNG imports of some 13Bcm. During the 2023 winter, another three FLNG terminals will be operational, and a pipeline will be expanded, boosting the capacity by another 19Bcm. Next winter, Germany will be capable of importing some 32Bcm, according to the terminal’s declared regasification capacity.

The country passed a law to bring back oil and coal-fired power plants into the country's energy mix in case of a critical gas supply situation. This could add 10GW of reserve capacity on an interim basis in a deal that runs until March 2024.

Germany is carrying out a stress test on whether the lifetime of Germany's three remaining nuclear plants, which account for 6% of the country's power mix, can be extended.  A short-term lifetime extension beyond December 2022 may be possible without ordering new fuel rods.

Crude oil consumption peaked at the end of the 1970s, but it remains Germany’s most important primary energy source. Oil covered 35.2% of the country’s primary energy use in 2022. Oil was mostly used as a transportation fuel, and only a small fraction was used for power production.

In 2021, Germany imported 81Mt of crude oil. Russia was by far the largest supplier in 2021, delivering 34.1%. The US provided 12.5%, Kazakhstan 9.8% and Norway 9.6%. In total, 30 countries supplied crude oil to Germany.

The situation changed significantly in 2022. During the period January to September, 28.6% of crude oil came from Russia, which was still the largest supplier by far (followed by the US with 13.1%). However, due to an EU embargo and Germany’s pledge to end crude oil imports from Russia, supplies ceased completely at the turn of 2022/2023.

From the 5th of February 2023, the EU will also ban the import from Russia of refined petroleum products, such as diesel fuel.  AME’s full year 2022 forecast for demand is 2.15Mbpd, and this will decline by 0.3% to 2.14Mbpd in 2023.

Over the medium term to 2027, Germany’s demand for natural gas is expected to grow slowly at a CAGR of 0.2% to 251MMcmpd on the back of a strong manufacturing sector. Germany’s unprecedented, accelerated plan to build FLNG terminals will help sustain the upward trend in the country's gas demand over the medium term.

During the same period, oil demand is forecast to decline slowly at a CAGR of 0.3% to 2.11Mbpd. Transport accounts for most of Germany’s oil consumption, so the transition to renewables has had little impact so far. Still, the energy transition has reduced the already minor role of oil in power generation (0.8% share in 2021 gross power production), because cheap renewable energy has crowded out oil-based generation.

Germany’s Climate Action Law stipulates that the transport sector must almost halve emissions by 2030 compared to 1990, which means oil use will decrease significantly.

Long Term

Long term (2028-2040), Germany’s demand for natural gas is expected to grow slowly at a CAGR of 0.3% to 261MMcmpd as long-term emission targets fuel growing natural gas consumption.

Germany’s liquid hydrocarbons demand is forecast to decline over the same period at a CAGR of 0.3% to 2.03Mbpd. The Germany’s government aims to reduce final energy consumption in transport to 60% by 2050 with the help of more efficient engines. Germany aims to have 15 million EVs on its roads by 2030; renewables will be able to supply more of the energy required for transport, reducing Germany’s dependence on liquid hydrocarbons. However, for certain modes of transport – such as freight trucks – imports of synthetic fuels could become necessary.

Germany recently sealed a long-term agreement with Qatar for the supply of LNG. Germany does not plan to end its reliance on Russian natural gas until mid-2024. The country is spending US$1.7 billion to import more LNG from the US and Qatar after blocking the completed Nord Stream 2 gas pipeline from Russia to Europe. EU countries are also working on setting up a strategic gas reserve and establishing storage requirements to share natural gas in emergencies.

Energy Transition

Germany has committed to net-zero by 2045. It has not submitted its own nationally determined contribution (NDC) but is part of the EU’s targets. Germany has established targets of a 65% reduction in emissions below 1990 levels by 2030, an interim target of 88% below 1990 levels by 2040, and carbon neutrality by 2045.

The German government has agreed to bring forward Germany’s exit from coal “ideally” to 2030, from a previous date of 2038. The government also said it would ensure that renewables accounted for 80% of Germany’s electricity by 2030 and 100% by 2035, up from 45% in the past year.

This will mean installing 200GW of solar and at least 30GW of offshore wind capacity by that year, with around 2% of Germany’s territory to be set aside for wind turbines. Germany will also aim for 10GW of electrolysis capacity by 2030.

Despite renewable energy reaching a record 46% share in Germany's electricity mix, the greenhouse gas emissions of Europe's biggest economy were around 761Mt in 2022, missing a target of 756Mt and falling behind the 2020 benchmark of a 40% cut compared to 1990. The increase in 2022 is noticeable in the energy sector, with a rise of 27MtCO₂e.

This is because more coal was used to generate electricity in response to an increased demand for electricity, lower electricity generation from renewable energies (down 7%) and the higher price of gas, all factors which have worsened over 2022.

Last summer, Germany agreed to allow the reactivation of coal-fired power plants or an extension to their lifespans to compensate for declining gas deliveries.  CO2 emissions from the energy industry in 2022 amounted to 255Mt, up 3% from the previous year, but slightly below the sector target of 257Mt.

Germany will continue to deliver the largest renewable capacity additions in Europe. Germany’s Renewable Energy Act 2021 allows the development of solar PV, wind, and bioenergy with higher auction volumes. RWE and Northland Power have formed a new joint venture to co-develop more than 1.3GW of offshore wind capacity in the German North Sea between 2026 and 2028.