Germany has committed new funding for liquefied natural gas terminals, the latest indication that it is willing to rethink its energy policy in the aftermath of Russia’s invasion of Ukraine.
Chancellor Olaf Scholz said that Germany would build two LNG terminals “soon” after cancelling a $11 billion pipeline proposal to deliver Russian gas to Europe. So far, proposed initiatives have been left only to the private sector, which is encountering challenges in the absence of government funding.
“The events of the last few days and weeks have demonstrated that a responsible, forward-thinking energy strategy is critical not only for our economy and our climate, but also for our security.” But it is also critical for our security,” Scholz told the German parliament on Sunday. “We will alter our strategy in order to reduce our reliance on specific energy suppliers.”
The plan, announced as Scholz declared that he would increase defence expenditure in a dramatic step-change for Germany, indicates that Europe sees the invasion of Ukraine as a watershed moment and wants to finally address its long-standing reliance on Russian gas. Germany depends on Russia for more than half of its natural gas, and the country’s decision to phase out nuclear power before enough renewable capacity to replace it has left it particularly vulnerable.
Berlin is also investing in gas and coal storage, and Scholz stated that the government will push for a faster rollout of renewables.
He didn’t go into specifics on the LNG projects, but the government stated last week that it was considering financial assistance and incentives to entice investors and potential clients.
Until now, dramatic price swings and rigid rules have discouraged potential clients and investors, and the industry has been pleading for assistance. The energy transformation and the fight against climate change also increase the possibility that new projects may become stranded assets, discouraging investors.
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