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Pathways to Overcoming Natural Gas Dependency on Russia—The German Case

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  • Christoph Halser

    (Faculty of Economics and Management, NTNU Business School, Norwegian University of Science and Technology, 7491 Trondheim, Norway)

  • Florentina Paraschiv

    (Chair of Finance, Zeppelin University, Am Seemooser Horn 20, 88045 Friedrichshafen, Germany
    Institute for Operations Research and Computational Finance, University of St. Gallen, 9000 St. Gallen, Switzerland)

Abstract

The war in Ukraine has sensitized German policy makers towards the negative economic impact of a curtailment of natural gas flows from Russia. Given its large import dependency, Germany has implemented regulatory measures for mitigating a possible gas shortage and is seeking to diversify from pipeline imports of liquefied natural gas (LNG). In this context, we provide a comprehensive review of the natural gas crisis in Europe and place it in the context of the peculiar role of natural gas in Germany. We critically discuss the economic impact of an embargo, and assess demand and supply factors capable of mitigating a supply shortage. We derive a short-term import substitution potential of 13 bcm, assuming timely installation of Floating Storage and Regasification Units (FSRUs). We discuss the potential for demand reductions in the power sector, in industry consumption, and in households, and estimate a combined maximum of 24.1 bcm. Under decreased industrial demand, the most optimistic scenario indicates an import gap of about 9 bcm for a one-year perspective. Given our findings, we advocate for the delayed phasing out of coal and nuclear power, the accelerated deployment of renewable energy, and caution in the initial execution of storage quotas and restrictions to industrial consumers.

Suggested Citation

  • Christoph Halser & Florentina Paraschiv, 2022. "Pathways to Overcoming Natural Gas Dependency on Russia—The German Case," Energies, MDPI, vol. 15(14), pages 1-24, July.
    • Handle: RePEc:gam:jeners:v:15:y:2022:i:14:p:4939-:d:856710
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