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Germany’s Rising Energy Cost Bring on the Fracking Debate

BASFY

Germany is debating whether to allow hydraulic fracturing to extract Nat Gas from shale, due to the growing concern that rising energy costs in the country could threaten its industrial core.

The German public is deeply suspicious of the practice, commonly known as fracking. Many Germans worry that the process, which involves using a high-pressure mixture of water, sand and chemicals to break apart energy-rich rocks, could contaminate their underground water supplies.

Last week the government unveiled a proposal that it hopes can bridge the gap between pro-fracking advocates in industry and environmentally conscious voters.

Through a change to existing laws, the government is proposing banning fracking near any water supply and in all national parks and conservation areas. Drilling anywhere else would be subject to approval based on an environmental-impact study.

The fracking debate comes as Germany is pursuing a radical restructuring of its energy sector. In the wake of the Fukushima nuclear disaster in Japan in Y 2011, Chancellor Angela Merkel abruptly declared that Germany would abandon nuclear power and transition to renewable energy sources such as wind and solar.

As the use of nuclear power declines, Germany is filling the gap with a combination of renewable energy and coal-fired plants.

Ms. Merkel’s “energy revolution,” as it shifts from nuclear power is having unexpected side effects.

Subsidies for renewable-energy producers that are financed in part through household electricity bills are causing electricity prices for ordinary consumers and industry to rise.

Germany’s biggest industrial power consumers have seen electricity prices per kilowatt hour rise nearly 40% in the past 5 yrs, according to the Cologne Institute for Economic Research, also known as IW.

Electricity prices for industry are nearly 15% higher than the average in the 27 nation European Union, IW said.
“We have reached the pain threshold,” said Michael Huther, IW’s director. He added that data show that energy- intensive industries are already beginning to curtail investment in Germany because of higher electricity charges.

“We are beginning to see creeping dis-investment,” he said.

As the country turns its back on nuclear power, it is also seeing its CO2 emissions rise. Long a leader in cutting carbon emissions, Germany’s emissions rose 1.6% last year, according to the Environment Ministry, the 1st rise in many years.

It is unclear what immediate impact increased Nat Gas supplies would have on German electricity bills. But, the availability of cheaper Nat Gas could help avert a large-scale return to Coal in Y 2020. That is the year that Germany will shut down about 6 nuclear power stations and many of the country’s Coal-fired power plants will also shut down due to age.

A plentiful supply of domestic Nat Gas would provide a better bridge fuel to replace nuclear power as Germany continues to build its alternative energy supply, say analysts.

If fracking is ultimately banned in Germany, analysts warn that Germany could miss out on a broader European energy boom. Eastern European countries like Poland and Ukraine have large shale deposits and are keen to exploit them.

Experts do not believe Germany has the kind of massive shale-Gas deposits that are transforming the US energy market. But there could be enough Nat Gas to meet Germany’s gas needs for about 50 yrs, based on the current rate of Nat Gas consumption, at costs below what Germany now pays for imported Nat Gas, analysts say.

So far, Ms. Merkel has sided with her public, expressing doubts about the viability of fracking in Germany and pledging to allow it only if it can be proven entirely safe. Ms. Merkel is trying to please the broader public, which surveys show is frightened by fracking, while not alienating industry, which is lobbying the government to do something about Germany’s soaring energy costs.

“The compromise here is to allow for pilot projects to do testing,” said Miranda Schreurs, director of the Berlin- based Environmental Policy Research Center and an adviser to the German government on the issue. “The government is trying to keep the door open for fracking to be able to say that if they do it, it will be safe.”

Germany’s energy industry welcomed the fact that the government has shied away from an outright ban on any fracking. The government’s proposals are a compromise between the environment minister, who initially wanted to ban fracking, and the economy minister, who wants to allow it. Industry sees the compromise as a step that would allow for some testing and which could help determine whether fracking is harmful to the environment.

“Only at the end of testing will we be able to judge using all relevant criteria whether this makes sense- economically, environmentally, and regarding its acceptance by society,” a spokesman for chemical and energy group BASF AG PINK:BASFY, DE:BAS said. “To do that, we need the framework which is now being established.”

Germany’s powerful environmental lobby says the government’s proposals do not go far enough and demand an outright ban. The opposition Green Party called the government’s move a smoke screen. “It’s like banning skiing in the Sahara,” said Oliver Krischer, a Green Party member of parliament. “An environmental-impact study, which is also embraced by the Gas industry, will do little.”