Energy Security in Germany - Essay Example

Section 1: Introduction - background on energy security -Germany: As far Germany’s own energy resources are concerned, its established natural gas reserves were estimated at 325 billion cu m (11.5 trillion cu ft) in 1999. Germany produces about one third of its total gas consumption which amounted to 226 million cu m/8 trillion cu ft in 1999. The remaining supply comes major foreign suppliers such as Russia, the Netherlands, and Norway (REF7). Germany has highly centered bulk supply of gas from domestic and imported sources. Germany’s huge coal reserves are the backbone of its total energy production. The reserve was about 73.9 billion tons in1996. Coal fulfilled as much as 23% of domestic energy demand in 1999 (Umbach, 2008). Umbach, (2008) further elaborated that liberalisation encouraged mergers through which the major energy suppliers and generators merged. Nine vertically integrated electricity suppliers (Verbundunternehmen), controlling the county’s electricity transmission as well as most of its generation merged to four keeping almost 80% of nation’s generation capacity with them. Much of the rest 20% was supplied by combined heat and power plants that produce electricity as byproduct and renewable energy companies. The price setting power resides almost fully with the four giant Verbundunternehmen. Post –liberalisation there has not emerged considerable new generators but stakes of foreign firms partnered in four major Verbundunternehmen. The subsidised energy suppliers producing renewable energy did come up nationally, though. Section 2: Define energy security + energy mix –Energy security usually has been taken to mean securing access to fuel supplies for the unhindered functioning Of a nation’s economy (PARES, 1999). Most often, the fuel supplies considered are supplies of oil and oil products. To put it simply, Energy mix or energy profile is the type of energy a nation produces and consumes. While energy security is incessant supply of energy to consumers. In the view of oil crisis the world over and diminishing fossil fuel resources, The EU-27 states have formulated objectives to ensure energy security. These are called ‘ 20 percent objectives’ which state : Energy efficiency should be enhanced by 20 percent in all EU nations; The EU nations to achieve goals better than those outlined in Kyoto protocol and carbon emission should be reduced by 20 percent by 2020 compared to 1990 and 30% if counties like U.S., India, China too follow these guidelines and reduce their carbon emission); The 20 percent of total energy requirements to be fulfilled from renewable energy resources. It is also pledged that European transport would use 10 percent of biofuels The German government has already planned to exceed Kyoto protocol by agreeing to reduce its Greenhouse Gas Emissions (GHE) up to 40 percent by 2020 compared to 1990 levels. The move expects to get €313 billion from public and private sources. Moreover, anti coal movement has taken the dimension similar to anti nuclear call of 1970-1980. This is a step to dislodge coal as national energy resource. Besides, Germany has already decided to exit nuclear energy and thus the nation’s energy mix has narrowed considerably. The alternativeleft to the nation is buying more gas from Russia and other politically disturbed nations which may put a negative impact on country’s energy security. Moreover, German Energy Agency (DENA) and the energy industry have repeatedly advised it to modernise older energy plants else the energy gap by 2020 may enlarge to 12000 MW beginning from 2012 (Umbach, 2008). Section 3: Energy mix in Germany (finite resources/ renewables: According to Energy Mix Fact Sheet, (2007) the energy mix of Germany has been fairly diversified. The consumption of oil is nearly equal to other EU nations at 38%. Country is planning to increase supply of natural gas as source of energy in place of solid fuels. Renewable energy has registered an impressive growth of 141% though still below 6% level of EU nations. Whereas coal with 6 739 million tonnes of proven reserves puts Germany in second position among EU nations. (http://www.bp.com). Though , Germany is phasing out its nuclear energy plants, this source presently contributes considerably to its energy needs. Germany holds second position in nuclear energy and third in natural gas production in all EU nations. In renewable energy, only UK and Netherlands surpass it(Energy Mix Fact Sheet, 2007). The contributions of various resources to nation’s energy demand are presented below in table-1. Table 1. Primary Energy Mix in Germany in 2005 (in %) (Source :Energy, 2006) Petroleum 36.0 Natural gas 22.7 Coal 12.9 Nuclear energy 12.5 Lignite 11.2 Renewable energies 4.6 Others 0.1 Germany is rapidly proliferating its renewable energy resources for domestic as well as export purposes. It is doing well also on the front of renewable energy. Germany is also exporter of solar cells and great employment generator in this sector. The production of solar cells has gone up to 67 percent from merely10 percent five years ago, according to Federal Association of Solar Energy, Bundesverband Solarwirtschaft (BSW). The industry employs 40,000 people who supply one fourth of the world’s solar cells made in Germany. Of the one million solar power systems, 95% are installed on rooftops. The 5000 companies’ strong solar energy industry has a total turnover of 3.7 billion euro. Solar plants bigger than 600 MW are now connected to central power grid (Renewable energies , 2009). Wind energy : Germany ranks number one worldwide both in number of wind energy plants and production of electricity from these. These plants are fulfilling up to 5 percent of nation’s electricity requirement. Moreover, Germany has 50% share in the world market of wind energy. In a single year, the export of wind energy went up from 1.8 to 3 billion euro. It is equal to an increase in exports from 50 to 64 percent. The markets for German wind energy are U.S., Canada, India, China, Poland and Portugal (Renewable energies, 2009 ). No carbon dioxide (CO2 ) emission alternatives: CO2 is the main culprit for global warming. Energy generation and consumption both are associated with CO2 emission . Germany has taken strong initiative, with a determination, to reduce CO2 emission. Its effort is shown in developing world’s first brown coal power plant in the East German state Brandenburg. They have began with a 30 MW plant whereby the CO2 is removed from fume by a technology developed at universities of Cottbus and Dresden. It is known as oxyfuel techniques. The gas is liquefied and stored underground (Renewable energies ,2009). Table -2 presents use of renewable energy share in nation’s consumption. Table-2. Renewable Energies in Germany (Source :Energy, 2006) (Share of energy consumption) 2004 2005 Electricity 9.4 10.2 Heating 5.2 5.4 Fuel 1.9 3.4 One more renewable energy development is worth a mention here. It is Biogas generation from waste and biomass. According to the German Biogas Association, some 3,500 biogas plants with a capacity of 1,100 megawatts had been installed by the end of 2006. This should rise to 9,500 megawatts by 2020. Presently, biogas plants already account for over one percent of the German energy production of five billion kilowatt hours. Through biogas parks several plants in a single park can be built on same infrastructure. However land area in Germany may be limitation for much expansion of this technology (Industrial-scale production , 2009). Section 4: State which factor is most important in Germany and why (Factors: security, supply,environment,safety, quality, availability, costs): In Germany the distribution network is divided into local, small suppliers which are about 950 municipality owned units (Stadtwerke). This highly fragmented supply is more extensive than any other European nation. These Stadtwerke manage both bulk as well as retail supplies including gas, heat and also other services viz. Water supply, waste collection and public transport. The prices of electricity and gas are highest in Germany, compared to other European nations. Moreover, there is wide disparities of energy prices among local suppliers. The high Network (bulk) prices lessened the chances of competitive pricing among retail suppliers. Germany needs to develop scope for price control and reduction (Umbach, 2008)-. the new German regulatory approach, (2006) detailed the supply infrastructure within Germany. the quality of supply consists of four dimensions. security quality is defined as prevention of damages to people and equipment whereas product quality represents the technical quality of the products electricity or gas. both, security quality and product quality are substantially determined by existing technical standards. Germany has clear regulations for these. on the contrary, there is flexibility in reliability and commercial quality. Since network operators can influence these quality dimensions according to their cost-benefit considerations. This willingness-to-pay (WTP) on part of consumers represents the crucial element in an incentive based quality regulation, because it constitutes the base for the minimum standards as well as the appropriate rewards or penalties as the case may be. Erdmenger , (2009) felt that Germany has made good progress towards Kyoto Protocol targets 2012. But for its own good, it needs to control CO2 emissions further since energy production sector still account for 50% of energy related CO2 emission. Environmental protection, economic viability and security of supply are the central themes of a new energy policy for Germany. German companies intend to invest a total of 70 billion euros in the energy supply sector by 2012. 40 billion euros on renewable energies and 30 billion euros on new power plants and grids would be spent. Despite differences of opinion among the coalition partners, the phasing out of nuclear energy would continue (Energy, 2006). It is evident from the discussion that though Germany holds position among top producers of energy yet its energy imports are higher than other EU nation. Its crude oil import from Russia and Norway is 56% of total imported energy while one third of energy comes from import of natural gas from these countries and Netherlands. The coal based electricity generation has increased consistently but the nuclear energy that contributes to 27% is to be phased out. The resources certainly needed to fill the gap created by loss of nuclear energy. Moreover the EU nations should interconnect their energy market to overcome the political pressures on gas supply (Energy Mix Fact Sheet, 2007). The January conflict between gas supplier Russia and transit country Ukraine left many European nations in frosted cold without heat energy. It is not uncommon as it happened earlier also. The incident pointed to need for diversifying imports and being less dependent on one nation for energy needs. The need is to built alternative transit routes supplying gas directly to central and west Europe. There are a few projects underway Nord Stream being one of these. This will cross Baltic to connect Germany directly with Russia, thus bypassing Ukraine. The major energy companies oppose liberalisation in this sector but for energy security they will have to forget about monopoly (Another Wake-Up Call , 2009). - Section 6: Suggest how Energy mix could be improved: According to Erdmenger (2009),Germany needs to increase production and efficiency of plants by modernisations and replacing coal fired power plants. Electricity generation based on natural gas is to be enhanced since it results in less CO2 and increases efficiency. Renewable energy production to be enhanced from 70 to 140 TWh/year using onshore and offshore wind turbines and biomass. Expansion of combined heat power production (CHP) and optimization of heat transfer across heating networks. For e. g. buildings to be heated by district heating systems rather than decentralised oil and gas fired systems. Section7: Conclusion - must include writer’s opinion: ‘Energy security is the most important factor in deciding a country’s energy mix’, regarding this comment my answer is in affirmative. Germany is phasing out the nuclear energy and reducing coal based energy generation. Both coal and Nuclear power provide more than 25% of nation’s energy demand while renewable energy has a share of only 4.6% despite aggressive efforts as presented in this article earlier. Moreover, the political turbulence in gas supplying nation’s leave importers in cold many times. Here also the nation must have alternative routes for supply ready and connect energy markets with other EU nations. In this regard presently the most important task for Germany is to ensure energy security while environment protection and research for newer ecofriendly resources must go on side by side. 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