The pandemic has intensified long-term trends: in 2020, in Germany, the main market for Russian energy resources in Europe, the demand for coal and oil decreased, and the shares of gas and renewable energy sources increased.
The demand for energy in Germany has been steadily declining for a decade and a half. The coronavirus pandemic has dramatically intensified this trend. In 2020, energy consumption in the German market fell by 8.7% compared to 2019 and reached the lowest in the history of a unified Germany. If we compare it with 2006, when the peak in energy consumption was recorded in the largest EU country, then the decline was 21%.
These are the preliminary results of the outgoing year, published by the “Working Group on Energy Reports” (Arbeitsgemeinschaft Energiebilanzen, AGEB). It includes five economic research institutes and four business associations from the energy sector. The mission of this non-profit organization is to collect, analyze and publish statistical materials from the energy field.
Thermal coal from Russia is losing the German market
The latest statistics from AGEB allows us to draw a number of conclusions about the prospects for the further operation of the Russian fuel and energy complex (FEC) in the German market, because Russia is Germany’s largest supplier of oil, gas and coal at the same time.
In the context of the pandemic, which entailed two lockdowns and a deep recession, in the Federal Republic of Germany in the electric power industry, industry, transport and in households, energy consumption from all sources, except renewable ones, decreased: the use of renewable energy increased by 3%.
In the coming years, Germany will accelerate the closure of coal-fired power plants
The consumption of hard coal and brown coal fell especially strongly, by 18.3% and 18.2%, respectively. This is due not only and even not so much to the crisis in the economy as to the course towards the gradual abandonment of coal in the electric power industry in order to reduce CO2 emissions into the atmosphere as part of the fight against global warming.
Since the end of 2018, when the last German mine was closed, all the hard coal in Germany has been imported. In 2020, about 45% of the demand was covered by supplies from Russia, with Russian companies mainly purchasing thermal coal used to generate electricity and heat.
The consumption of thermal coal fell by more than 26% in 2020, says AGEB and explains this “mainly by the reduction in electricity consumption, the growing flow of electricity from wind and photovoltaic plants to the grid, as well as the increased use of natural gas in the production of electricity.” The consumption of coal in German metallurgy decreased in the crisis year 2020 by only 14%.
If we consider that by January 1, 2021, as part of the program of abandoning coal generation in Germany, 11 coal-fired power plants will be closed, then the conclusion for the Russian fuel and energy complex is more than obvious: the coal industry of the Russian Federation should tune in to the fact that it will lose the German export market, and in 2020, this process began with full force.
Natural gas increases its share in the fuel and energy balance of Germany
At the same time, for Gazprom and for Russian gas companies in general (Novatek supplies liquefied gas to the EU market), the gross results of 2020 seem to be quite encouraging. Although the consumption of natural gas in Germany has decreased, but by only 3.4%.
“The main reason for the reduction in consumption,” says AGEB, “is the decrease in gas demand due to the coronavirus pandemic in the industrial sector, in handicrafts, in trade and services. At the same time, the use of natural gas in the production of electricity and heat has increased. a small increase in private household consumption is expected for relatively warm weather. “
Gazprom’s pipeline gas has good chances to somewhat strengthen its position in the German market
For the Russian fuel and energy complex, the conclusion follows from this: as industrial production grows in Germany and the service sector begins to recover, gas consumption in the German market is likely to increase, although, most likely, not very much. At the same time, one can apparently count on a rise in prices, which in 2002 turned out to be especially low.
Along with renewable energy sources, natural gas is the only source of energy, the share of which in the fuel and energy balance of the Federal Republic of Germany increased in 2020. It increased from 25.1% to 26.6%. True, this happened due to a decrease in this indicator for other fossil energy carriers – coal, peaceful atom and oil. Thus, the share of oil fell from 35.2% to 33.9%.
The growth in oil demand in Germany can provide aviation kerosene
Oil consumption in Germany fell by 12.1% in 2020, but this was practically only due to a halving in demand for aviation kerosene, AGEB points out. Automotive fuel sales declined only marginally, while demand for cheaper petroleum products for the chemical industry increased by 3%, and diesel fuel for heating buildings even 5% percent: many homeowners took advantage of the lowest prices in ten years to fill their tanks as much as possible. …
From the statistics of AGEB it follows that the revival of civil aviation will be a decisive factor for the growth of Russian oil supplies to the German market. Until at least mid-2021, this process appears to be very slow. At the same time, the rapid growth in the number of electric vehicles and the increasingly widespread introduction of “green” technologies in various areas will lead to a reduction in demand for petroleum products.
So, of the three fossil energy resources exported from Russia to Germany, natural gas has a real chance of increasing sales and market share in the short and medium term. At the same time, however, we must not forget that the main trend in the German market for a decade and a half has been to reduce total energy consumption. The Energy Reporting Working Group lists the consistent energy efficiency gains of the entire German economy and warm winters as a result of climate change as key reasons for this sustained trend.