Demand for gas to rise as Germany exits nuclear, coal – analysts

Germany’s gas demand is set to increase significantly from 90 billion cubic metres (Bcm) today to 110 Bcm by 2034 as the country exits both nuclear and coal, said the energy research company and consultancy Rystad Energy in a press release. Increasing amounts of gas would be necessary as more gas-fired power generation capacity will be needed to meet demand and to offset the intermittency of renewable sources, said Rystad. The company’s analysis showed that importing more Russian gas through the contentious and unfinished Nord Stream 2 pipeline under the Baltic Sea was the most reliable and cheapest option versus US liquefied natural gas (LNG) cargos and other intra-Europe pipe routes. “If Germany decides price is the most important factor, Nord Stream 2 will go ahead, as it diversifies supply to the market, reducing the risk of high energy prices,” said Carlos Torres Diaz, Rystad Energy’s head of power and gas markets. In addition, Rystad said that domestic LNG terminals would allow Germany to reduce dependency on a dominant source of supply and gas buyers in the country could better optimise their portfolios.

Future demand for natural gas in Germany is a contested issue. Some projections and plans see overall demand go up due to the gap left behind by nuclear and coal exit. Others see renewables largely fill this gap. Overall gas use would fall as efficiency and electrification progress, and the role of gas would be to generate energy mostly during peak demand periods or to back up intermittent renewables. Today, Germany’s import needs are served almost exclusively via pipelines. Rystad said that about half of Germany’s total natural gas imports – some of which are transported on to other countries – came from Russia in 2019, and Norway and the Netherlands supplied a bit more than 20 percent each. There are companies that aim to build the country’s first domestic LNG terminal. Plans for one of these, however, were recently put on hold due to reluctance by market players to make binding bookings for import capacities.

Environmental Action Germany DUH said that the costs of getting such new LNG terminals up and running are much higher than widely believed. Not only would new pipes be needed to connect the terminals to the existing infrastructure, but the requisite transmission system would also have to be expanded according to plans by grid operators, said DUH in a press release. Consumers would have to cover the additional 600 million euros through higher grid fees.