Berlin Is Germany prepared for a freeze on Russian gas supplies? Peter Adrian’s words do not bode well. The President of the Association of German Chambers of Industry and Commerce (DIHK), which represents more than three million companies, sees various omissions in the preparation.
“A few months ago, I too underestimated how dependent the German economy is on Russian gas and how Russia has systematically expanded it,” said Adrian in an interview with the Handelsblatt.
Above all, the federal government has done too little. “Coal-fired power plants are now being fired up again. Why not months ago?” Adrian rumbles. The gas-saving auctions planned from October would also come far too late: “And it’s also poorly designed and will therefore hardly help.”
In addition, Adrian is bothered by the time-consuming permits for switching from gas to oil and the lack of opportunities to lower temperatures in the factories.
As a solution, the DIHK President proposes being able to prescribe large-scale exceptions to legal requirements without further ado. “During the concerted action in the Chancellery, I proposed creating a statutory exception clause that temporarily overrides all the formalities that are now hindering us in the crisis,” said the DIHK President.
Read the whole interview here:
Mr. Adrian, the maintenance work for Nord Stream 1 would normally be completed after Thursday. Do you expect that Russia will then supply gas to Germany again?
Who can know. At the weekend I go to the Rheinkirmes in Düsseldorf with my wife, a very similar principle applies there. We’re going to go into the ghost train and when we get scared there for the first time, you think it’s over. But then 25 more moments of horror follow. In other words, even if gas comes back via Nord Stream 1 in the next few days, that’s no reason to relax. And no matter when a delivery stop came, the consequences would be fatal.
How fatal?
Energy prices are already dramatic. If deliveries were to stop, gas prices would go up even further. And if the companies rely on electricity or oil instead, the prices there will continue to rise.
Prices are the bigger problem than a possible gas gap?
Neither we nor the Federal Network Agency have reliable information about what the gas supply will be like next winter. However, it is quite possible that there will be a gas gap. We must not waste any more time and must develop contingency plans.
You want to start developing contingency plans now, five months after the outbreak of war?
As an economy, we are already very intensively involved. You are correct in your basic statement. A few months ago, I too underestimated how dependent the German economy is on Russian gas and how Russia has systematically expanded it so that it can now take advantage of this threat. We have been absolutely naïve – in politics, business and society.
If emergency plans are only made now, the failures in the economy must be immense.
Overall, the German economy has come a long way. Many companies have already reduced gas consumption down to the smallest detail. Personally, I am meeting with all of my site managers at my company next week to consider how we can reduce temperatures and replace gas with oil burners. In general, the German economy does not whine, but acts: Wherever gas can be replaced, many companies are now doing so. And productions are relocated abroad. We watch that too, with tears in our eyes. The German chambers of commerce abroad, for example in the USA, are already registering a great deal of demand. Gas there currently costs only about a tenth of what is called for in Germany.
>> Read also: These are the four scenarios for the future of Nord Stream 1
Where should politicians have acted earlier?
Coal-fired power plants are now being fired up again. Why not months ago? Then the gas storage tanks would be much better filled today. The auction model, with which companies are to be paid premiums if they do not use gas, could also contribute to this. But that shouldn’t start until October. We need that right away. And it’s also poorly designed, so it won’t help much.
In what way?
The plan is designed to stimulate savings only when gas is no longer physically available. We must now do everything we can to free up every available megawatt hour of gas in order to fill the storage facilities for the winter and not only when we are already in the middle of a gas shortage. We are in a situation that was already to be expected at the beginning of March. Instead of reacting, we are now just the driven.
A few coal-fired power plants and an auction model would not have changed that.
There are so many other possibilities. There are still major restrictions when installing photovoltaics. If you want to convert your plants from gas to oil, you need a complex new permit. This leads to further delays of at least months.
How can this be resolved?
We don’t have that time at the moment. During the concerted action in the Chancellery, I proposed creating a legal exception clause that temporarily overrides all the formalities that are now hindering us in the crisis. The workplace ordinance still does not allow the temperature in a warehouse, in which – mind you – people only work occasionally to be reduced from 18 to 16 or 15 degrees. I now want to give my employees a warm jacket and turn down the heating. Where is the problem? Politics lets far too much time pass in all this. This reminds me of the bad experiences of the two Corona summers, where we missed preparing for autumn and winter.
Does this also apply to the postponement of the nuclear phase-out?
In an emergency situation you have to think through all the scenarios to get through the winter. I am not an expert to make a final decision as to whether a later phase-out of nuclear power would make sense. But one thing is clear: we have to make a decision here soon. In the meantime, there is also the fact that France has massive problems in the electricity sector, because nuclear power plants are probably also idle in winter. So we not only have a gas crisis, we could also have an electricity crisis.
>> Read about this: Federal government is examining longer nuclear power plant runtimes
Should there be a gas shortage, private consumers would be protected; industry would be switched off first. Does this make sense?
This is a European regulation and is correct in principle – but of course everyone in society is now required to do so. And of course you have to ask which industrial sectors are existentially important. That’s very difficult to judge.
In which order should the economy then be switched off?
This demand, which has been circulating for months, that there should be a strict order, has never made sense. The glass industry, for example, cannot continue production with 30 percent less gas, and there is a risk of permanent damage. For others, 30 percent less might make little difference. Instead of ordering complete shutdowns at companies, it would be better to have a percentage reduction at companies across industries in the event of a gas shortage. Last winter could be used as a benchmark for this.
If there are production cutbacks, are the existing tools sufficient?
Short-time work has proven its worth. But we also need support measures similar to those we had during the corona pandemic – for example bridging aid.
The finance and economics ministers presented aid for companies that are affected by the consequences of the Ukraine war – and are now receiving harsh criticism for it.
(Photo: dpa)
So the protective shield that is now being gradually opened up – with energy cost subsidies and KfW loan programs – is not enough?
I find the energy subsidies in their previous form questionable because they are based on the electricity price intensity, but now it is mainly about gas. It is more of a coincidence that you take the right company into account. And it took far too long, the grants can only be applied for a few days. With the KfW loans, the hurdles are so high that companies have little interest in them. Demand is in the low three-digit range.
So it would be enough to improve the existing aid?
No, something is also missing. So far we have not had an instrument for the event that the authorities actually shut down companies because there is no more gas. At the moment, support is only provided for high gas costs, which are no longer incurred when the plant is shut down. Instead, the fixed costs, for example, would have to be partially compensated, which remain the case even if a company can no longer produce or can only produce to a limited extent.
Do you think that energy prices will fall at all in the foreseeable future? Or do we have to get used to the current level?
During the corona pandemic, we experienced how quickly the demand for energy and thus the price level can change. If we save energy, diversify the supply and massively accelerate the expansion of renewables, then this will lead to lasting relief on the markets – and that will also have an impact on the price. But distortions cannot be ruled out.
>> Read about this: Price rally is likely to continue for years
What do you mean?
I know a company that is the world market leader for bulbs for the automotive industry, halogen, xenon and LED bulbs. That produces here in Germany, and gas is an essential production factor. If energy prices remain permanently high, the company faces the choice of moving production abroad or shutting down operations. And unfortunately there are many such companies in Germany.
How much transformation of the economy is still possible given the new realities?
Crisis always has something to do with opportunity – and no matter how bad the current situation is, it might help to shake us up. Politicians must now do away with superfluous luxury bureaucracy and concentrate on their core tasks, and we entrepreneurs must reconsider how we can master the situation.
Will the state be able to incentivize enough investments if it has to comply with the debt brake at the same time? Or does the debt rule no longer fit the new situation?
If the debt brake is abandoned, at some point the creditworthiness of our state will be called into question and the desire for new taxes and levies will grow. This then has very concrete negative effects on the companies, for example on their own financing conditions and their cost burden.
Is that always the case?
In exceptional circumstances such as the corona pandemic or now perhaps in view of the upheavals caused by the war in Ukraine, we certainly need exceptions to the debt brake. It remains to be seen whether this will also be the case next year. In any case, the federal government’s current budget planning still envisages state investments at a high level. And the climate and transformation fund, which is intended to support companies, is also still well stocked.
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