Germany will not abandon Gazprom’s gas

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On the inner German front, while no change. The leading roles of Germany with great difficulty trying to create a parliamentary coalition, the leader of the bloc of the Christian Democrats Angela Merkel is still not formally held the post of Chancellor, and over it, as over all Germany, while hanging the sword of Damocles of new elections to the Bundestag. However, the German media reported that Merkel recently signed agreement between the parties CDU/CSU and the social Democrats, whereby the ruling coalition in the Bundestag can still be created.
The agreement provides that Germany by 2030 increase the share of electricity generated from renewable sources, nearly 70% of the total electricity production in the country. This may theoretically imply a reduction in imports by Germany of hydrocarbons, including Russian gas.
In fact, the probability of failure of Germany from purchases of pipeline gas to Russia, and even a sharp reduction in Russian gas imports is extremely small. First, because to go to Germany for a hundred percent electricity production from renewable sources is technically impossible is a Nordic country, and the climate is not suitable for all ensure, for example, solar energy. Second, the cost of electricity production from renewable sources is much more expensive than the generation of electricity in gas turbine power plants.
And Germany, as well as most of the Eurozone countries, only recently got rid of the problem of deflation, but not to the main problem of the economy it was the high inflation. And social implications of the growth in electricity prices will not keep you waiting. Thirdly, fashion the “shale revolution” in Europe has already passed, if we talk about the craze of Europe projects on shale gas production, 2008-2012. And it became clear that shale gas, compared to the cheap natural gas that Russia supplies to Europe is much more expensive and carries serious environmental risks.
So what about the refusal of Germany to import Russian gas is not yet mentioned, and those volumes of gas Germany gets from Russia currently make up about a third of the energy mix of this country. Due to the growth of gas imports to Germany, “Gazprom” in 2017 increased its share on the European market to 34%, and we expect that in the next few years it will decline. However, disputes with Naftogaz and the uncertainty of the political situation in Germany before the end of March may still exert a downward pressure on the shares of “Gazprom”.
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Natalia Milchakova,
The Deputy Director of analytical Department,
Alpari