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Global Economy

Germany's expensive gas offensive

The numbers are gigantic: Around 18.3 billion euros are currently earmarked for the construction of new gas power plants, pipelines or liquid gas terminals in Germany. Depending on the scenario, up to 40 new gas-fired power plants are to be built over the next ten years for the conversion to a greener economy. The energy industry is supposed to finance this change largely itself. But there are also high government subsidies.

Gas prices will likely continue to rise

The price development on the gas market comes at the wrong time for German politicians. Compared to the pre-Corona year 2019, the price for heating with gas has increased by around 100 percent. Above all, this has something to do with developments on the world market. According to many experts, prices could rise even further. The future energy supply in Germany would then be even more expensive.

The reasons for the price increases are varied and in some cases even reinforce each other. First of all, the demand for energy has increased worldwide – a catch-up effect of the production, which was temporarily shut down during the pandemic. At the same time, less gas was pumped.

High dependency on Russia

The CO2 price in European emissions trading has also increased significantly, making energy from gas, coal and oil significantly more expensive. And of course the conflict between Russia and Ukraine also plays a role.

Russia always emphasizes that it is fulfilling its delivery obligations. This applies to long-term supply contracts, but in the short term – ie on the spot markets – less gas is currently flowing from Russia to Western Europe. This hits Germany particularly hard, because about half of the natural gas consumed in this country comes from Russia.

Phasing out coal as a profitable business

Switching to gas can be very lucrative for the energy industry at the moment. Because it benefits from a special rule from the German coal phase-out plan. This provides for the so-called coal replacement bonus for combined heat and power plants that phase out coal.

There can be more than 100 million euros for a new power plant. According to the plans of the previous government, power plants can only be subsidized via the coal replacement bonus with 1.8 billion euros a year. In addition, there is a lucrative payment for the first 30,000 hours of full-load operation. All in all, not only the investment, but also parts of the fuel can be financed from this.

Leaks worsen the climate balance

The switch from coal to gas is also encouraged because significantly less CO2 is produced during combustion. However, studies show that methane leaks occur time and again along the natural gas supply chain. Methane is a greenhouse gas and more than 80 times more harmful than CO2. It takes more than a decade for it to break down in the atmosphere.

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