An Interview with Peter Altmaier, Germany’s former Energy Minister
This week, Peter Altmaier, Germany’s former Minister for Economic Affairs and Energy (2018-2021) visited Calgary to speak at the PETRONAS International Energy Speaker Series hosted by the Centre for Corporate Sustainability at the Haskayne School of Business with the University of Calgary.
After the Petronas Energy Speaker Series, Peter sat down with Jackie to talk about Europe’s energy crisis.
Here are some of the questions Jackie asked Peter Altmaier: Why did Germany become so reliant on Russian gas? Did he ever fear a scenario that Russia would use natural gas as a weapon? How significant is the loss of the Nord Stream pipelines? Has Russia shred its reputation as a reliable supplier of energy forever? What do you expect the energy situation in Germany will be this winter? How important will clean hydrogen and hydrogen imports be for Germany in the future? What was your reaction to Chancellor Scholz’s recent visit to Canada, on the lack of East Coast LNG and the possibly of green hydrogen?
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Episode 172 transcript
Disclosure:
The information and opinions presented in this ARC Energy Ideas podcast are provided for informational purposes only and are subject to the disclaimer link in the show notes.
Announcer:
This is the Arc Energy Ideas podcast with Peter Tertzakian and Jackie Forrest. Exploring trends that influence the energy business.
Jackie Forest:
Welcome to the Arc Energy Ideas podcast. Well, it’s a little bit different format today because I’m on my own, but I do have a wonderful guest. I’m very happy to introduce Peter Altmaier, who was the German Minister for Economic Affairs from 2018 to 2021. Welcome.
Peter Altmaier:
Welcome. Thank you for inviting me, thank you for a wonderful debate we have had around all the energy issues that are so important and in Europe, not so much different from what you are discussing in Canada.
Jackie Forest:
To give our listeners some background, we just attended the PETRONAS International Energy Speakers series, which is hosted by the University of Calgary’s, Haskayne School of Business. Peter is the guest this year, came all the way from Germany and told us all about what’s going on in Germany, obviously lots when it comes to energy. But maybe we’ll start, you’re a close confidant of Angela Merkel. Tell us a little bit about working with Angela.
Peter Altmaier:
I had the honor and the pleasure of working in her team for more than 20 years: as a friend, as a parliamentary first secretary, as a minister, and different ministerial posts, she is a very committed person. She is interested in international issues as well as in domestic issues when it is about individual people. For example, she was very much active in order to fight Ebola disease in Africa when it occurred. She has done a lot of helping younger people in Africa to get better education. She was interested in international corporation as well. And of course, when you work for such an extraordinary person, it is sometimes demanding. We have been friends, but I have been in different functions, always the one to execute what was decided in government in between the federal states enter national level in the European Union, I terribly enjoyed it. I believe she’s certainly one of some most important politicians in Germany in the last two centuries.
Jackie Forest:
With that insight, and we talk about your time as Minister for Economic Affairs, but you had other ministerial roles previous to that, let’s talk about energy because that is the real situation that’s making the news. We’ve obviously got the real war, which is a human tragedy going on in Ukraine today, but we have what we’re calling an Energy War in Europe. That was actually the title of one of our recent podcasts. Germany is really at ground zero in that war. What is it like on the ground? Are people fearing this winter? Are companies shutting down their production? Like what’s happening to Europe?
Peter Altmaier:
Nobody knows how severe winter will be this year. Nobody knows what will happen on international energy markets. My guess is that form my previous experience, from the figures I have seen as far as gas storage in German facilities is concerned, I believe we will manage to have a reliable gas supply even this winter without Russian gas. Germany and European countries have bought enormous quantities of LNG gas as a spot markets. Therefore, when speaking about energy war, it is not just about Europe because when you have a rally at the spot markets for gas, then it concerns Asian countries, emerging countries like Bangladesh, like Thailand, like Cambodia. There is for the time being and probably for two, three or four more years not enough gas available on the world market. The Russian gas is missing, they cannot simply export it to Asia because there’s no pipeline.
There are no LNG capacities for doing it, that means that all the other countries are now competing and racing for gas supply. Europe will be in a relatively good position in Canada and in the US, you’ll going to have lesser problems than we have in Europe because you are self supplying. To a bigger extent, Germany was producing more gas in the past, but according to this phenomenon that is called NIMBY “not in my backyard” the gas production has collapsed by half over the last couple of years. Why? There’s no majority who are using shallow gas. In Germany, we have enormous quantities of reserves in that, there is no consensus about exploiting natural gas that we still have in the coastal areas of the country. Therefore, Germany is relying as an industrialized country much more than as countries do on the import of energy, especially on the import of oil and gas.
Jackie Forest:
Right. Well, you got into my next question a little bit, which is I think a lot of people look at the situation and say, “well how did Germany allow themselves to get so dependent on Russian gas?” Back when you and Angela Merkel were in the positions thinking about this, did you ever think, fear a scenario like this by relying more and more on those Russian pipelines?
Peter Altmaier:
Well, we in the government, were always concerned about the development where domestic production was shrinking. Where important European suppliers were no longer supplying, like the Netherlands which will stop production of gas because of the fear of earthquakes in the coastal areas. And then the point was, can we afford imports from other countries with LNG gas in order to become more diversified with regard to Russian gas? We were ready to arrange for that. But the private sector in Germany was not ready to pay a higher price for gas than they had to pay for the Russian gas. And it was a reliable supply for more than 40 years, it never happened. When Russia so unlawfully attacked Ukraine and started this unlawful war, then there was first debate in Germany whether we shall still buy Russian gas. Under the impression of the potential change in the German attitude, Mr. Putin used gas as a weapon as long as he could use it, that is now. But we have managed and nevertheless to buy gas in other countries to fill our storage capacities, now at 95%. They are full, and that means we have not been as dependent as it has sometimes been set. It has been very expensive to buy the gas elsewhere. It has been quite demanding, quite challenging to find it and to buy it, but we managed to do so. As a matter of fact, in all the previous years, Germany has benefited from a relatively cheap energy, that was also important because the renewables we have expanded faster than almost any other industrialized country in Europe have been very expensive. And therefore, the business was interested in cheaper gas and not in more expensive gas
Jackie Forest:
Right, economics drive these decisions where when energy security isn’t rating very highly, I think people may look at energy security a little differently now, because you had so many years of not having to worry. Let’s talk about these pipelines. Nord Stream 1 and 2, there was sabotage, we still don’t know who did it. But how bad is that, losing those pipelines in terms of Germany’s future energy supply?
Peter Altmaier:
I believe that most of the problems have already been overcome because Russia stopped in summer of this year delivering gas via Nord Stream 1. At the moment where Nord Stream 1 collapsed, there was zero gas supply through that pipeline. That means the situation has not been aggravated, still not yet a clear picture on who has done it and how big the damage is. We suppose it’s a big damage because it was a very skillful terrorist attack against it that private persons probably cannot conduct. The second thing is there is still intact pipeline Nord Stream 2. We have very clearly explained to Mr. Putin already last year that Nord Stream 2 will never, never become operational if the Ukrainian crisis would aggravate, and this is exactly what he did by invading Ukraine. I believe that the Russian gas import has come to an end for a foreseeable future.
Jackie Forest:
It’s a loss of infrastructure that you were never going to use anyway. I guess, from Germany’s perspective, it’s not much of a loss. Now, do you see a scenario, obviously it’s hard to predict future as events of the last few months of have taught us, where Russia could sell gas to Europe again or have they shredded their reputation forever?
Peter Altmaier:
I would say Mr. Putin has shredded his reputation forever, but for sure, that will not be healed, even not in a generation. The question what will happen if Russia one day becomes a democratic country is pure speculation today. Nobody knows whether it happens at all, when it happens and whether it will last if it happens. Then even if Russia becomes a democratic country, it’ll depend on the agreements that the German importers will assign with exporters from different countries in the world. For example, we are now negotiating LNG supply from United Arab Emirates and Qatar, they all insist on quite a long period of obligation. I’m not authorized for giving you figures about it, but it’s quite long. I can imagine that if Canada one day would decide to export LNG more than it’s doing today, then they would be interested in long running agreements and obligations as well. That would have consequences, because we will import as much gas as we need and not more.
Jackie Forest:
Right, even in that scenario of Russia becoming a democracy, you’ve already made long term agreements with others and there isn’t much room potentially.
Peter Altmaier:
Yes. I expect something different to happen. Honestly, in the past, Europe had access to relatively cheap Russian pipeline gas and most of the Asian countries, including China, also emerging countries like Thailand or Bangladesh had to import more expensive LNG gas. This is something that can and potentially will change because if Germany and Europe now will sign up to a long-lasting agreement with countries like Canada or the Arab countries for LNG gas, I expect a new Russian government to build pipelines to Asian countries in order to export the gas. But that will take 3, 4, 5 years or even longer. So, for a foreseeable period of time, I cannot see how Russia can sell its gas and therefore, we are looking of increasing gas production in other countries worldwide.
Jackie Forest:
So, even if Russia doesn’t become a nice state, I think they’ll find buyers maybe in some countries, but it will take time to build those connections. You talked about those long-term contracts. I know you’re not going to tell me the number of years, but I’m assuming they’re multi-decade type contracts just from I’m hearing about.
Peter Altmaier:
A few decades.
Jackie Forest:
Germany and Europe want to get off hydrocarbons. Isn’t that a conflict signing these long-term contracts? I think that prevented Germany from signing them in the past. That was one element of why you didn’t.
Peter Altmaier:
Yes, Germany is a signature country to the Paris Climate Agreement, and we have decided to be even more ambitious. In the follow up of a judgment of our constitutional court, we have enshrined in our legislation that Germany will become climate neutral by 2045. That means we still have more than 20 years. And in these 20 years, we will need natural gas, LNG gas, shallow gas in considerable amounts. The demand will even further increase in the coming years because the cradle and expansion of renewable energies will make it unavoidable of phasing out of coal-fired power plants. They are not flexible enough; therefore, we would not reduce CO2 emissions. That means that the role of gas in Germany will increase certainly over the next 10 years, perhaps even a bit longer. On the medium term and long run however, it seems in my view, likely that natural gas as from the year 2035 approximately will be substituted more and more by so-called green hydrogen.
This is a new technology, or it is for the first time that an old technology will be applied at a very large scale. That means you can produce hydrogen gas from renewable energies like wind or solar and then you can use it in electricity production, you can use it in neat production, you can use it in the industry and then it’s climate neutral. I see a gradual transition, and this is part of energy transition, from natural gas that will achieve its peak by the year 2030 and then, it will slightly but steadily go down and see an instant increase of green hydrogen. By the way, you can produce hydrogen also from natural gas and it is called fuel hydrogen. But under the condition that you capture CO2, that is byproduct of it in a climate-friendly way, that’s the technology that exists.
I believe that gas producers will have a business model for many years still to come. It is not just the German and European gas demand, the demand for gas will increase around the globe because all the coal-fired power plants will be switched off one after the other in order to achieve the Paris Climate targets. That means an increased role for gas and in some areas also for oil.
Jackie Forest:
Okay, we’re going to go from coal to gas and coal by the way, people may be surprised. We on an energy equivalent basis, we use more coal to gas today globally as a source of primary energy. But let’s talk about hydrogen. I have to say some people are skeptical about hydrogen here in North America.
Peter Altmaier:
Why?
Jackie Forest:
I think they’re skeptical because, especially as an export business, it takes a lot of energy to make it, it takes a lot of energy to ship it to Europe and it’s quite expensive. Do you think that you’ll be importing a lot of that hydrogen, or will you be producing it domestically and why would you need to import it? You can just use water and the sun.
Peter Altmaier:
Exactly. We need to import it because Germany is a relatively small state, densely populated with lots of industry and we are committed of producing almost 100% of our electricity demand from renewable energies by the year 2045. That means we will have to double and to triple our onshore and offshoring wind parks, our solar panels. I’m afraid that there is simply not space enough for a 100% domestic supply. Germany today, is importing 77% of its primary energy demand and that will not fundamentally change in the future. Other countries with lots of sunshine, lots of wind and unpopulated areas will have much better conditions for renewable green hydrogen. We will produce 5 gigawatts in the next couple of years every year, that’ll increase from some 100 megawatt, 5 gigawatts up to 10 gigawatts after the 2030s.
Jackie Forest:
That’s a new renewable power. Each year you’re adding 5 gigawatts.
Peter Altmaier:
No, it is in total 10 in Germany. This is seen as a pilot; we need much more than just 10 gigawatts. We need much more.
Jackie Forest:
More than 10 each year, just for your power side.
Peter Altmaier:
Exactly.
Jackie Forest:
Forget about hydrogen and some of the other names.
Peter Altmaier:
No, we are talking about hydrogen that will be used to substitute gas, that will be used to substitute coal, that will be used to substitute other nuclear for example. We cannot produce it at the lowest prices, because Germany has relatively few sunshine and not so much wind. Therefore, we do it just in order to demonstrate it is possible, it is feasible. Germany has a very strong position in producing electrolysis which are needed to produce green hydrogen. But this can become a win-win situation that countries with lot of wind and sun and water and sufficient space will start green hydrogen production. Germany will auction enormous quantities in the coming years and will also try selling its electrolysis, which you need to produce the green hydrogen. That means after the big oil tankers, after the LNG ships, a new energy infrastructure will emerge a global scale. And that is of course, interesting for everybody who is involved in energy business. It’s new business model and to can earn a lot of money by implementing it.
Jackie Forest:
Right. It will be expensive though. I think the energy losses of shipping hydrogen are high. You talked before, the reason there was the dependence on Russian gas, it was cheaper. Do you think that people are willing to pay more because importing hydrogen’s probably going to be a pretty expensive source of energy?
Peter Altmaier:
Well, there are so many questions and look, for every question there is a clear answer. We know that it is expensive, we know that the transport is risky because hydrogen cannot be safely kept. It can pass even steel, can pass everything because it is the slightest element in the elementary system. But this is one of the reasons why there is a competition.
For example, in Chile, I have financed a model project for green hydrogen in order to produce synfuels, renewable fuel for combustion and genes. It is co-financed by Porsche, that is a famous German car manufacturer. People who can afford a Porsche can certainly afford these synfuels are much more expensive than normal fuels if they want to have some joy and enjoy themselves. The point was when I started the project, I hoped that Chile would produce green hydrogen, it would then be shipped to Germany and the synfuels would be produced there as all the fuels are today produced in Germany and by the refineries. Something very strange happened, Porsche said, “Oh, it’s very difficult to find the infrastructure to ship it already today.” Chile said, “Oh, that’s not a problem. We can produce the synfuels in Chile.”
Jackie Forest:
And it’s easier to ship that.
Peter Altmaier:
Then you produce synfuels and then you can ship it with traditional ships, it’s much cheaper. That is in the first place a pragmatic solution. On the second look, it means however, that Germany will lose some production sites that we still have today. It’s all a question of jobs, is the same is true for the steel industry. You can produce green steel, climate neutral steel, by substituting coal through green hydrogen. But of course, there are today, very attractive offers from countries like Scandinavian countries and others to say, “Oh, we have so much green hydrogen that we can easily produce or blue hydrogen. Why not to produce the steel pallets in our countries. And then you can further process them in Germany?” Of course, it means that part of the steel production will be outsourced.
Politics shall not interfere in entrepreneurial decisions, that is my personal conviction. But as a politician, it was always my overarching interest to reserve industrial capacities in Germany because I believe that Germany today, is a good country to live, because we have still a very important industrial base. This is something I would like to preserve for the future.
Jackie Forest:
Right. Some really important points there. First of all, we don’t know what solutions come over the next decades. We’re talking about today, but it could be that it forces some of that industry out of Germany. But governments can overcome that by sometimes putting subsidies in to make that energy cheaper and continue that.
Peter Altmaier:
But to say frankly, what we are doing, we are providing no subsidies for ordinary production processes. What we are doing is in order to compete with China, but also the US paying subsidies in some areas or applying higher tariffs for customs, is simply that we subsidize very highly innovative projects. The first mover technologies are subsidized with the authorization of European commission, called Important Project of Common European Interest. We have, for example, spent more than 5 billion Euro to establish battery cell production in Germany. We will not pay any subsidy for the production process, that has to be competitive by its own merits. What we have done was to help transform the technology.
Jackie Forest:
To get it started. Americans are choosing to subsidize the production for clean energy now. But let’s talk a bit about nuclear very quickly. Do you have three existing plants, I think in Germany that some people think should be shut down. Others say because of the energy crisis, we need to keep them running. And then there’s also the question of the future. Could you use nuclear, new nuclear replace the need for some of that natural gas? Just in general, the history has been since that Fukushima incident, Germany took a pretty strong position against nuclear. Do you think that changes as a result of this energy crisis?
Peter Altmaier:
Well, as far as public opinion is concerned, it has already changed. After the Fukushima incident, 80% of the German people were explicitly against nuclear energy. Today, 80% are in favor. That has totally shifted. The main problem is that we have already shut down most of the nuclear power plants we have had in the past. There are only three remaining. They have producing only 6% of the German electricity demand. This is still important in times of crisis certainly, but it is only a small part of the solution, certainly not the entire solution that we need.
Jackie Forest:
Right. Because you only have so many plants. I guess, there’s in the future, technology could change its small nuclear, but that’s interesting that people’s support has changed so drastically. Let’s talk about Canada. Chancellor Scholz visited I think about a month or a little bit more than a month ago, and there was a couple of messages he was told by our prime minister that LNG off our east coast doesn’t seem economic. However, there was an agreement to start shipping that hydrogen that we were talking about in the future. What’s your reaction to that? Would you like to see LNG from Canada?
Peter Altmaier:
First of all, I’m a little bit proud because corporation of Canada, the field of green hydrogen, which general renewable energies started one year ago when the memorandum understanding was signed between my counterpart and the Canadian government in May. It was during COVID, so we had to do it in the video ceremony. That was the starting point, and this will continue as far as LNG gas is concerned. I’m pretty much convinced that German companies would prefer Canadian LNG gas from some other countries. But the question whether you want to produce it, whether you want to export is a purely domestic decision of Canada, where I cannot and will not interfere being a German person.
That is the point, I mean, sometimes I’m asked, “Why did you not stop the import of Russian gas earlier?” And then I said, “Yes, because there was no cheap alternative. The business was not interested in Germany.” In that, but I can even not remember that a single politician from one of the gas producing countries knocked on my door and said, “Oh, Peter, we have an offer some very interesting LNG ships to provide you with our gas.” Did not happen with the Arab countries, it did not happen with other countries as well. Why not? Because there was a very flourishing world market for LNG, especially the Asian countries, not having pipelines of Russia, were relying very much on LNG gas. Now the question is, as I see first, whether people in Canada want to help and actually transition succeed by taking part in the transition process. That means satisfying part of the growing gas demand worldwide, this is the issue you have raised. It has to be answered by the Canadian people, the Canadian companies and the Canadian authorities. We cannot prescribe what you shall do. If Canada would come to the decision and to the conclusion that export of more LNG gas would become an option, then I’m sure there will be a lot of interest from the side of Germany.
Jackie Forest:
Thank you for those thoughts. The couple messages there was, yes, if there was LNG from Canada, there’d be demand or interest in it in Germany. There’d be a willing customer there. I think a very important part that maybe not everyone understands in Canada or accepts is that gas is part of the energy transition, and we are going to need gas. If we’re going to have what we like to call an orderly transition, you’re going through something quite disorderly right now, we are going to have to have enough hydrocarbons and natural gas to support that. With that, I really appreciate you coming all the way from Germany to Canada and sharing your perspectives. It’s been a fascinating conversation.
Peter Altmaier:
I enjoyed it as well. Wonderful people, fascinating discussions. I wish all people in Canada the very best for the future.
Jackie Forest:
We hope that everything goes well, and weather is not too cold this winter and that 94% gas storage gets you through the winter as you are predicting. Hopefully, the next several years you will find that gas that you’re looking for. All right. To our listeners, if you like this podcast, please rate us on the app that you listen to and tell someone else about us.
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