Based on its current storage, Germany looks set to make it through another winter without Russian pipeline gas, demonstrating that the fears of the past two years were unmerited. According to a new poll, Germans are no longer worried about potential gas shortages. Policy experts have come to hold the same view, provided the country isn’t subject to a combination of very unlikely factors, such as a complete halting of LNG imports or an enduring cold snap this winter. Alas, it would be premature to claim that the energy question has been finally resolved to Germany’s benefit.
If measured only through availability, it would be fair to say that Berlin has overcome its addiction to Russian gas. If, however, one takes into account the price the German economy will have to pay — and is already paying — for this victory, it may turn out to be a Pyrrhic one.
According to the energy consultancy FG Energy, “Germany’s industrial base, in particular its more energy-intensive industries, will find it challenging to recover to pre-Ukraine war levels.” Primary and final energy demand have hit a 50-year low, mainly due to demand destruction in the country’s industrial sectors. Rather than finding more efficient ways of providing its industry with energy, Germany simply allowed parts of it to disappear, thereby reducing gas demand — as well as economic output, paid wages and manufacturing. Real GDP growth has stagnated since 2017, and forecasts are not optimistic about a spurt anytime soon.
An additional Pyrrhic victory for the German economy is the exit from nuclear power, which almost overnight turned the country from a net exporter of electricity into a net importer. To add insult to injury, the national obsession with renewables caused an overproduction of electricity during sunny and windy days, forcing Germany to pay neighbouring countries to take German “green energy”.
In other words, whether there was too much or too little domestic electricity production, German taxpayers had to foot the bill regardless. Electricity and gas prices have been rising continuously, so while the supply has been secured, it now comes at a higher cost, making the economy less competitive and the average German poorer.
If the new standard of prosperity for a G7 nation is whether or not its people are resigned to the fear of freezing to death in the winter, Berlin can judge its policies a success. In the long run, though, it is unlikely the German people will accept the idea that being reduced from one of the wealthiest countries in the world to one which can barely afford heating is a sign of competent governance.