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Portfolio: The Future of German Energy

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Video Transcript: 

Vice President of Analysis Peter Zeihan discusses Berlin's announcement to close its nuclear sector and the ensuing competition between France, Poland and Russia to fulfill Germany's energy needs.

Editor’s Note: Transcripts are generated using speech-recognition technology. Therefore, STRATFOR cannot guarantee their complete accuracy.

On May 30 the German government announced the seven nuclear power reactors that had been shut down in the aftermath of the Japanese earthquake and tsunami would never be reopened. In fact, they went on to announce the entire shuttering of the German nuclear fleet by 2022. Germany relies on nuclear power for roughly one-third of its electricity needs and at this point, the closure of the entire nuclear sector opens a four-way power game for the future of the German economy and German loyalties. The German plan is to replace the entirety of the nuclear industry with renewable power. Unfortunate for the Germans this is not cost possible. Nuclear power is less than one-third of wind power and less than one-twentieth the cost of solar power. Replacing one-third of their total power generation within a decade is simply not feasible much less possible. Which brings us to the other three options: the first is France.

France's entire post-World War II strategy has been about lashing itself to Germany so that Germany can never again threaten it. In the post-Cold War era, the strategy has been refined somewhat in order to make France as essential to German plans as possible. Now unlike Germany, and France's population is remarkably pro-nuclear and so the French are going to be trying to build as many nuclear power reactors as possible so that they can export electricity to Germany to make up as much of the difference as possible. This has already been happening to a limited degree. In the aftermath of the Fukushima disasters in Japan, French power actors have been running up to the red line in order to supply power to replace those seven nuclear reactors that the Germans took off-line. So the French already have a leg up in this competition.

The second country is Poland. Poland's concerns are little more complex. While the French are obviously concerned about what happens should Germany get too confident, the Poles are sandwiched between a resurgent Germany and resurgent Russia. There is nowhere for them to turn; economically they can't compete with either; demographically they can't compete with either. They need a way to shape the relations of one or both of the states. The Polish advantage, somewhat ironically, is coal — a fuel that has been steadily phased out across Europe over the last 20 years. Poland still gets 90 percent of its electricity from coal and unlike the expensive nuclear power reactors which require several billion euros and five to 10 years to construct, you can put up a coal plant for as little as a few hundred million in a year or two. Poland is actually the country, ironically then, with this old politically incorrect fuel source that actually has a chance of coming to Germany's rescue in the shortest term for the lowest dollar amount.

The final player in the game is Russia. Russia has been attempting to secure a partnership with the Germans for decades and such a partnership would solve many of Russia's long-term demographic, economic and military problems. A German-Russian partnership would neutralize Poland, and really, neutralize all of Europe. It would make it very difficult for the Americans put forward any sort of anti-Russian policies in the European sphere of influence as there would simply be no one to carry them out. The United States needs Germany to at least be neutral in its relations with Russia otherwise the Russians have a free hand in all the other theaters, and as powerful as the Americans are, so long as they are involved in the Islamic world they simply can't counter Russia everywhere. Economically, the Russians see Germany as their strongest trading partner and their largest source of foreign investment. They realize that if they can get their hook into the German soul, their life simply gets easier all around. Their plan is pretty simple. There is something called the Nord Stream pipeline which bypasses all the transit states between the Russians and the Germans that is in the process of final testing right now. It should come online in 2012 and then slowly be ramped up to a full capacity of 55 billion cubic meters of natural gas per year. That 55 billion cubic meters of natural gas is enough to replace half of the electricity that nuclear power has recently given Germany. All that has to be done is the construction of additional natural gas-burning power plants in Germany — the fuel is already there.

And so we have a four-part race: first, the Germans, who have a politically attractive plan that is economically unfeasible; second, the French, who have a politically attractive plan that is economically expensive; third, the Poles, who have a politically unattractive plan which is economically dirt cheap; and forth, the Russians, who already have the fuel source in place.

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