During his time at AICGS in Washington DC, DAAD/AICGS Research Fellow Dr. Thomas O’Donnell conducted interviews with U.S. experts and government officials to ascertain their viewpoints on energy security issues facing Germany and the EU. Each expert was asked to discuss their analysis of German and larger EU energy vulnerabilities and to give their opinions on the energy policies being implemented by Berlin and Brussels to counteract these vulnerabilities. Many of the experts interviewed in April and May 2015 are or were recently U.S. officials. In these cases the experts were also asked to elaborate about policies the U.S. is implementing with regard to these matters in its relations with Berlin and Brussels.
On May 27, Dr. O’Donnell gave a seminar presentation based on preliminary results of this research. (Note: he stressed that more systematic analysis of the extensive interviews with U.S. experts will be produced at a later date.) Dr. O’Donnell explained that, in his discussions about German and EU energy vulnerabilities, two key areas were considered. With respect to fossil fuels it was natural gas and with respect to renewables, the German Energiewende.
- Natural Gas Vulnerabilities in Europe
Regarding natural gas, O’Donnell highlighted three internal-to-EU aspects about which he interrogated U.S. experts: natural gas infrastructure, sector governance, and market unification. As far as external threats, the key topic of discussion was Europe’s high dependence on Russian gas supplies, and both how and how well might Germany and the EU respond to supply interruptions, especially in light of the ongoing Ukraine crisis. So too, experts were all asked for their viewpoint on the trajectory of Russian policy regarding former USSR states and its willingness to use gas supplies as a geopolitical instrument.
As background he explained the following issues regarding internal problems that were interrogated:
–Infrastructure: A more sophisticated infrastructure has to be completed within Europe to create an interconnected system that would be robust enough with respect to external shocks and cutoffs.
–Governance: A certain number of measures have already been or are on their way to be implemented. The European Commission has launched the Energy Union designed to continue developing the bloc’s energy market and energy security. However, the Lisbon Treaty gives sovereignty to the individual states, which can be problematic for the development of a truly integrated market. Other key issues discussed during interviews with U.S. experts were the anti-monopoly case placed by the European Commission against Gazprom and the EU’s Third Energy Package, which is a legislative package in force since 2009 for an internal gas and electricity market. One of its core elements is the unbundling of energy suppliers from network operators.
–Market and Supply: There is a need for unifying the European market and diversifying the supply side. There are also some questions regarding the production of energy and whether the EU is going to pursue significant fracking operations.
On these matters, O’Donnell explained that American experts and officials were generally quite aware of the details of the above matters—contrary to assertions of some Europeans. However, he observed a spectrum of responses toward the associated German and EU policies. At the one end, think tank experts and officials alike were aware of the difficulties for Germany to exert “leadership” toward these issues as well as the structural lack of EU mechanisms for addressing these issues. In the case of past and present expert-officials, such understanding did not greatly mitigate a quite strong sense of frustration and even exasperation with German and EU policies or the lack of policies.
In terms of external threats, U.S. experts were mostly concerned about the issue of monopolist market distortions and the use of gas as an instrument of Russian nationalism and geopolitics as exemplified by the cutoffs of 2006 and 2009. Dr. O’Donnell noted that there are a number of major gas pipelines connecting natural gas fields that go into export markets in Western Europe and run via Ukraine. About 35 percent of European imports come from Russia. Of this percentage, about 50 percent come through Ukraine.
- The Results of the EU Energy Stress Test
The European Commission launched a stress test in 2014 that all the member states had to complete to prepare for the contingency of a supply stop of Russian gas to Europe. The results of the simulation lead to the conclusion that “solidarity is key.” In the event of a colder weather and a six-month cutoff, if the Western countries shared their storage gas or re-piped the gas back to the Eastern countries that are more strongly affected by a cutoff from Ukraine, some countries would be hit but the overall severity to the entire Union would be moderate. On the other side, if there would be no sharing of gas supplies, Eastern Europe would be severely hit.
However, most U.S. experts questioned the ability of the EU to induce member states to act in solidarity in transfers of energy supplies. According to them, relying on solidarity would not suffice since there’s not a mechanism in the EU that can force member states to share. On the contrary, the Lisbon Treaty ensures national sovereignty in energy questions—with this latter point arising repeatedly.
- Policy Responses to Energy Vulnerabilities
Diversification of supply is key to the energy vulnerabilities mentioned earlier. Both the U.S. and the EU want the creation of a Southern Gas Corridor, which would bring Azerbaijan’s Shah Deniz gas via Turkey to Europe and avoid Russian control. For security reasons and to create a coherent single market, Europe also needs more connectors in the north and the south so that gas can be shared. Most recently, the Atlantic Council and Central Europe Energy Partners advocated for the idea of a North-South Corridor of energy that would bind together the economies of Central Europe and link the region with Western Europe. By diversifying sources of energy, such a project would enhance the continent’s energy security. Parts of the diversification process already involve small projects aimed at building new liquid natural gas (LNG) terminals in Europe. Other options for diversification include increasing gas imports from Norway and bringing liquid natural gas globally, especially from the U.S. From this perspective, it is interesting to note that the Europeans are now pushing to have a separate chapter on energy in the negotiations with their American counterparts on the Transatlantic Trade and Investment Partnership (TTIP).
Perhaps the strongest responses to these matters were from expert-officials who, for example, repeatedly expressed the sense that when special inter-state meetings have taken place in recent years to deal with short-to-medium-term EU energy security, the German leadership in particular often seems to be “preaching” about their long-term strategy of the Energiewende and renewables. While quite sympathetic to this commitment to carbon reduction, U.S. experts often seemed quite frustrated with this being used, it was felt, as a diversion, justification, or moralizing propagandistic stance while avoiding dealing with the immediate energy security issues at hand. In particular, some German politicians, when confronted repeatedly by U.S. counterparts, it was stated, seemed to be simply “wishing” that this problem would “just go away” when discussing Russian gas issues and the Ukraine, and U.S. experts noted striking differences in even public stances between top German leaders as to the trajectory of the ongoing energy problems concerning Russia and Russian gas.
- German Energiewende Vulnerabilities
The current energy system in Germany, which relies on nuclear power, coal, oil, and gas, is progressively being replaced by a new energy supply based on renewable energies. The process called “Energiewende” includes several key targets. One of the main priorities is to phase out its nuclear power. At the same time, the electricity supply shall consist of at least an 80 percent share of renewable energies by 2050. There are also intermediate targets of 35 to 40 percent share by 2025 and 55 to 60 percent by 2035. Finally, the energy consumption shall be reduced by 10 percent by 2020 and 25 percent by 2050 compared to 2008 levels.
Dr. O’Donnell reported that U.S. experts seemed to agree that the Energiewende was an irreversible process, that wouldn’t be undone in the future, despite the fact that Germany has nuclear plants that could have been used for continued, cheap base-load energy production. He also highlighted that the amount of coal in Germany’s energy mix is very substantial compared to the amount of natural gas used (about 17.8 percent of coal versus 9.5 percent of natural gas). According to U.S. experts, Europe needs a dedication to the idea that natural gas will always be a very important player and, as a consequence, these experts noted that there should be more political focus on this issue over time.
Today, Germany is faced with a strong competition from other regions of the world. The country has lost some of its competitive advantage on solar panels to China and in wind it has lost much ground also to the U.S. and China. So, these industrial-tech advantages of its early commitment to a renewable energy transition seem to have been lost due to the German leadership’s lack of action against, for example, Chinese solar panel dumping. Furthermore, the unexpected U.S. shale revolution constitutes a big competitive challenge for German companies since cheaper natural gas in the U.S. is lowering electricity and other energy costs for American manufacturers, while Germany’s continue to rise. U.S. exports of LNG could also have a major impact on the price of energy and gas in Asia. However, U.S. officials and experts often express exasperation and/or point out a perceived “hypocrisy” in German officials expressing interest in obtaining more gas imports while at the same time criticizing and being somewhat “moralizing” against the fracking techniques that produce that gas in the U.S. As one put it (paraphrasing): If there is such concern for gas-supply security, then why is there not more motion toward fracking in Germany and the EU, as part of the need to diversify supplies?
Summary written by our intern, Alix Auzepy.
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Made possible by the support of German Academic Exchange Service (DAAD) with funds from the German Foreign Office (Auswärtiges Amt - AA)