Germany fires up coal plants to avert gas shortage as Russia cuts supply

Germany will significantly increase its use of highly polluting coal to preserve energy supplies ahead of the winter as Russian cuts to gas exports threaten shortfalls in Europe’s largest economy.

The German government said on Sunday it would pass emergency laws to reopen mothballed coal plants for electricity generation and auction gas supplies to industry to incentivise businesses to curb consumption. The move illustrated the depth of concern in Berlin over possible gas shortages in the winter months.

“This is bitter but in this situation essential to lower the use of gas,” said German economic minister Robert Habeck, a member of the Green party.

Russia cut capacity on the main gas export pipeline to Germany this week by 60 per cent, sending ripples across the continent as western officials became convinced that Moscow is weaponising its gas exports in response to EU sanctions following the full-scale invasion of Ukraine.

Italy, which has also seen gas supplies from Russia fall, is expected to announce emergency measures in the coming days if supplies are not restored.

Habeck said Berlin was working on a new law to temporarily bring back up to 10 gigawatts of idle coal-fired power plants for up to two years; that would increase Germany’s dependence on coal for electricity generation by up to a third.

“The situation is serious,” said Habeck. “It is obviously Putin’s strategy to upset us, to drive prices upwards, and to divide us . . . We won’t allow this to happen.”

The plan is at odds with Germany’s climate policy; it aims to phase out coal by 2030 as it is much more carbon-intensive than gas.

Germany’s three remaining active nuclear power plants have a capacity of 4 gigawatts and are scheduled to go off the grid by the end of this year. Their lifespan will not be extended as the government has concluded the technical and safety hurdles are too high.

Prior to Russia’s invasion in February, Germany imported 55 per cent of its gas from Russia.

In recent days, Russia’s state-controlled gas exporter Gazprom has reduced supply volumes through the Nord Stream 1 (NS1) pipeline that runs through the Baltic Sea to Germany, blaming Canadian sanctions that left pumping equipment maintained by Siemens Energy stranded in Montreal.

Germany and its allies in Europe have rejected Gazprom’s claims, arguing any technical issue was a pretext for Moscow’s retaliation against EU sanctions. Gazprom has not utilised alternative pipeline routes to make up for the supply shortfall through NS1.

European gas prices, already running close to record levels, soared further last week in response to the latest supply cuts.

Rising energy prices are stoking inflation and a cost of living crisis across Europe, which central banks are struggling to address without tipping the region’s economy into recession.

German chancellor Olaf Scholz called the country’s dependence on Russian energy “a mistake of Germany’s economic policy” and told newswire DPA that previous governments missed out on creating alternative gas supply routes.

Germany plans to install four floating liquefied natural gas (LNG) terminals and has prioritised refilling gas storage tanks that can be used in winter. Currently they are 56 per cent full, and Habeck wants to reach 90 per cent by December.

“We need and we will to do everything to store as much gas as possible,” said Habeck, calling it the “highest priority” and adding that “it would really be a tight squeeze in winter otherwise”.

Germany aims to reduce normal consumption by about a fifth without resorting to rationing, while increasing Norwegian pipeline supplies and LNG imports.

However this could still leave supplies dangerously tight, especially if it is a particularly cold winter. Average temperatures in Germany are 6C or below from November to April, according to the German gas regulator. 

Analysts say German storage, if filled to 90 per cent, would only be able to cover two or three months of normal winter consumption if Russian supplies are completely cut off. 

Germany will also introduce an auction mechanism for industrial gas users, Habeck said. Companies that cut consumption will be compensated, a person familiar with the government’s plans told the Financial Times, but the details are still being finalised.

Last year gas-fired power plants accounted for 15 per cent of German electricity generation. By the end of May, Germany had 31.4 gigawatts of coal-fired plants and 27.9 gigawatt of gas-fired plants on the grid, according to regulatory data.

The 10gw of mothballed coal capacity which will be put back on the grid account for just under 5 per cent of total German production capacity.