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Get Ready for the Berlin Gas Lift

Will Germany impose sanctions on Russia if it uses the Nordstream pipelines as a political weapon?  According to Angela Merkel this is what a future German chancellor must do if Russia either cuts off gas supply to or hikes up fees for Ukraine.  This is an easy statement to make for someone stepping out of a position of power but would be much more difficult for whoever will take her place. 

Why?  As Germany has allowed its domestic oil & gas production to decline, it has invested heavily in wind and solar technology.  To be fair, these technologies now make up a significant percentage of Germany’s energy portfolio, but they have not ramped up fast enough to swoop in and save the day – especially given that Germany also decided to decommission its nuclear power generation capabilities by 2022.  To keep its economy going Germany needs to nearly double its natural gas consumption – not a bad option if it can be produced responsibly and cleanly.  However, instead of producing it on German soil with German know-how, they have looked to Russia instead. 

Right now, Germany’s gas imports from Russia largely get delivered via pipelines that traverse Ukraine.  Germany has been interested in stability in Ukraine for reasons such as natural gas pipelines, human rights, natural gas pipelines, protecting innocent civilians, and natural gas pipelines.  Ukrainians (and Belarussians for that matter) are rightly nervous about the construction of the Nordstream pipelines that bypass all of Eastern Europe by linking Russia directly with Germany through the Baltic sea.  Germany may still care somewhat about political stability in Ukraine but the average German won’t have to feel any direct pain if things get sideways next door.  

The second of four Nordstream pipelines will start up later this year with the remaining two to be built in coming years.  Each of these pipelines will carry 5 billion cubic feet per day of natural gas – about the amount produced in Colorado each day.  Given that these lines traverse the Baltic Sea, they create a path by which Russia can sell an additional 4 Colorados worth of gas without central or western European (read NATO) countries having to care what happens on their eastern flank. 

So will Germany sanction Russia if it behaves badly with respect to Ukraine or other Soviet / Warsaw Pact states?  If so, Germany could face a severe energy shortage were Russia to close a few valves in retaliation. Way beyond rolling blackouts, this would lead to a radical increase in energy prices, electricity rationing, and a crippling of the Germany economy.  It looks like Russia has the upper hand.

If the fit starts hitting the shan and if fit gets real Germany will have few options.  Were pursuing solar and wind the problem?  Absolutely not.  Investing in storage technology and cross-country transmission?  Great ideas.  What about exuberant optimism around how quickly wind and solar will replace oil and gas while looking to countries with questionable human rights records to bail you out?  Yes, Houston, that was the problem.

In the years after WWII as the Cold War was just starting to get cold, the US and UK joined forces to airlift critical supplies including food and fuel into Berlin after areas of the city were blockaded by Soviet forces.  This effort (which lasted close to a year) was referred to as the Berlin Air Lift and is seen as a proud moment for the West as the allies came to the aid of a former adversary in a critical time of need.  Given what is going on in Germany at the moment, it appears that there may be another crisis brewing, albeit one that will have been much more predictable and its effects more readily foreseen.  Short of a crisis, at best the West is bolstering a country with known human rights issues who has acted aggressively towards otherwise autonomous states in its own backyard.  And this doesn’t even touch on the question of whether the production of Russian gas is carried out in a more environmentally responsible manner than if it were produced in Germany.

Let’s go down Germany’s path of diversifying our energy portfolio.  Let’s also follow their lead in investing in transmission infrastructure to better leverage emerging technologies and ensure high reliability for everyone.  But let’s also learn from their mistakes and not eat their energy-dependency vomit with them in the meantime.

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