LNG overkill: Claudia Kemfert predicts German liquid gas disaster in the “climate laboratory”.

The temperatures are falling and the need for heating is increasing. Unlike last winter, the German gas storage facilities are overfull this year, even without Russian pipeline gas. However, the new LNG terminals have little to do with this. Only ten percent of supplies were imported by sea, according to Table.Media reported. Nevertheless, the federal government is undeterred in pushing ahead with plans for a seventh floating terminal in Mukran in the north of Rügen. An expensive mistake, predicts energy economist Claudia Kemfert from DIW. She accuses politicians in ntv’s “climate laboratory” of falling for the gas industry’s threats, as they did in the past: “The way back will be market-driven with ‘stranded assets’ and compensation payments that we have to make.”

ntv.de: Three LNG terminals are in operation, three more are scheduled to be completed this winter, and a seventh is planned. How many LNG terminals do we need in Germany?

Claudia Kemfert: We have this question in a new one study examined and are currently once again coming to the conclusion: We are building oversized gas capacities. In Germany, but also in neighboring countries. That was already there Nord Stream 1 and Nord Stream 2 our conclusion. We also demonstrated in a study last year that we do not need a single fixed and permanent LNG terminal. Three temporary ones to transition would be enough and save us a lot of money. Because if we succeed in reducing our gas consumption as planned and desired, it could happen that the terminals become… Stranded Assets end and we have to pay the operators compensation for lost profits for the next 15 to 20 years. The terminals are government money thrown out the window.

The corporations could sue if we build terminals but don’t use them?

Yes, energy companies can sue the federal government under the Energy Charter we know from the past. The Bundestag has already dealt with this and has also determined that the LNG terminals can fall under this contract. The federal government has also admitted this. The terminals could lead to investment lawsuits.

Because deliveries have already been agreed and, if there are none, the companies can say: You’ll still pay for that.

Exactly. The companies building there have the opportunity to take legal action before the European Court of Justice. This applies to all liquid gas terminals. The Energy Charter is effective under international law. The federal government undertakes to make compensation payments if necessary for 20 years. Arbitration proceedings conducted by various EU member states and by companies in other EU member states have become effective with clear case law.

Which height?

The federal government has stated that a total of nine billion euros is available for the terminals. Then you would have to look at where and to what extent a lawsuit would be filed if a terminal was not in use as planned and what annual income would be lost as a result. Similar to Nord Stream 2, the following applies again: as part of our climate protection goals, we have to reduce gas consumption. This will happen through the Building Energy Act and the heat transition. Industry is also reducing its gas consumption and will continue to do so. As soon as demand decreases, it is better to buy comparatively cheap pipeline gas from Norway.

Is Norwegian gas the reason storages are full even though our LNG terminals are underutilized?

Yes. We get most of our gas from Norway via a secure pipeline, as well as smaller quantities from the Netherlands and Belgium. Liquefied gas has the smallest share: we obtain some gas via terminals in the Netherlands, Belgium and partly France. There are three German terminals on the network in Wilhelmshaven, Brunsbüttel and Lubmin.

Why do we use foreign terminals when we ourselves have three that are underutilized?

This also depends on contracts that have been concluded in the past. We have been using the import capacities of other countries for a long time and will continue to use them. German capacities, on the other hand, still need to be built up and connected via pipelines. This takes a while. The market plays a role in this: Liquefied gas is comparatively expensive. If you can meet the demand via pipeline gas, you do that.

Can the LNG terminals still help reduce energy prices? It is always said that once we increase supply, gas prices for consumers will fall.

No, LNG is more expensive, which tends to drive up gas prices. And when demand is comparatively low – as is currently the case – supplies are secured through cheap pipeline gas. This is typical of the market and brings prices down. Especially since the new LNG capacities require a certain amount of recapitalization and must earn their value. This will also lead to an increase in prices rather than a decrease.

Do you accept the security argument? One reason for the terminals is the fear of freezing in winter. With Nord Stream the mistake was made of relying on one supplier. Now there is a desire for protection and different options. Would the terminals help to quickly refill the gas storage facilities in an emergency?

These are different scenarios that the federal government is playing through: What happens if an attack is also carried out on the Norwegian pipeline? This happened with Nord Stream 2 and apparently also with the Balticconnector pipeline. In a scenario in which gas no longer comes from Norway due to attacks, technical defects or maintenance work, the increased liquid gas capacities would hardly help us, because this only covers seven percent of our needs. We would have to purchase a lot more gas from other countries and, above all, reduce consumption. But then we would end up in the shortage situation that some people had already predicted last year. If this word-case scenario comes to pass, Mukran wouldn’t help either.

What should we do instead?

In our study, we found that there are neither energy economic nor industrial policy arguments for additional capacities. We must move away from fossil fuels and further reduce consumption. The industry did this well and, because of the high gas prices, imported products such as ammonia that were previously manufactured in Germany. This has significantly reduced consumption. Such steps are necessary and mean that no new capacity is built that will not be utilized in the future. New capacities tend to increase the risk of Stranded Assets, i.e. wasted investments that could result in compensation payments. Then the costs rise.

So why are the terminals still being built? Was this activism after the Russian attack on Ukraine and the destruction of the Nord Stream pipeline? Has the gas industry put pressure on politicians?

A possible attack on the Norwegian pipeline is one motivation. You want to protect yourself, a certain level of activism takes place. But the gas industry is certainly interested in building these terminals. With the Building Energy Act you have seen what influencing forces are at work. This has been weakened so much with myths that gas heaters can supposedly run on hydrogen in the future that in the end it primarily helps the gas industry. But LNG terminals cannot simply be converted to hydrogen. We would again need expensive, new infrastructure. In this respect, the terminals are certainly a reaction to the gas industry, which is pushing and pushing. We know this from the construction of Nord Stream 2. What was ultimately organized there in Mecklenburg-Western Pomerania with the alleged climate foundation can no longer be justified.

In the case of Nord Stream 2, you stated that BASF in particular had threatened to lose jobs if the pipeline was not built. Is the gas emergency the new economic threat?

At least that’s what I suspect. But if we look at the threats: It was always said that jobs would be lost if Russian gas stopped coming. We have hardly received any Russian gas for more than a year. What happened? Certain products are imported, but the big wave of migration has not occurred. Just like the Gatnotlage that was predicted.

In your opinion, is there still a way back? Could the construction of the terminals still be stopped?

Given the promises that have already been made to companies, I don’t see that happening at the moment. The connection pipeline in Mukran has now also been approved. The way back will be market-driven Stranded Assets and compensation payments that we will have to pay in the end. We already know this from the delayed energy transition. We don’t learn from past mistakes. This will be an expensive undertaking again.

Clara Pfeffer and Christian Herrmann spoke to Claudia Kemfert. The conversation has been shortened and smoothed for better clarity.