Trump, NATO Summit Exposed Germany's Natural Gas Problem

The Germany, Russia + Putin, Trump, natural gas, and pipeline fiasco at the NATO summit has got all of us thinking. For decades now, the Russian bear has continually been sinking its mighty energy claws into Europe and Germany. Despite long promising to "get off Russian energy," Gazprom sales to Europe hit an all time record last year, and Europe is still the largest buyer of Russian oil.

The row at NATO centered on building and financing the $11 billion Nord Stream 2 pipeline, a planned gas route under the Baltic Sea more directly linking Russia and Germany that has divided the West for many years now. Along with some European nations, both President GW Bush and President Obama were against the project, knowing that it riskily ups Europe's dependence even more on Russia and poses national security threats to the Western allies. Yet, others claim the pipeline is critical to more freely bringing gas into the continent. Germany imports more than 80% of its gas and Russia provides about half of the imports.

But, I want to focus on Germany's energy situation here, a predicament of its own making. It was all supposed to be so different. Backed by its ambitious Energiewende "energy transition" plan and the Kyoto Protocol, the country has invested heavily for decades now to not just "get off" Russian energy but to get away from fossil fuels altogether. The reality is that this isn't coming close to happening. For example, wind and solar still supply just 3% of Germany's energy, compared to to a whopping 79% for fossil fuel (see Figure). As for power, which accounts for less than half of all energy consumed but is the only energy market that wind and solar compete in, even though "Germany has spent $200 billion over the past two decades to promote cleaner sources of electricity," wind and solar supply just 18% of electricity, compared to 43% for coal - mind-blowing because we were told that coal would "go away the fastest."

Germany's need for even more Russian energy - which the Trump administration isn't alone in calling a threat to the NATO alliance - is indicative of the country's energy failures.  The blind obsession with renewable energy explains why Germany has been paying over $26 billion per year for electricity that has a wholesale market value of just $5 billion. The results for families are devastating. Home electricity rates in Germany average around 40 cents per KWh, compared to 13 cents in the U.S. The upside appears non-existent: "Germany to miss 2020 greenhouse gas emissions target." The phase-out of non-carbon nuclear will make Germany's climate ambitious far tougher.