Germany Prepares for an Age of Energy Scarcity

The Federal Network Agency’s plan introduces a further risk: that, at some point, even expensive energy may no longer be available at all.

The Federal Network Agency is a German authority under the Federal Ministry for Economic Affairs and Energy. Its responsibilities include overseeing and regulating electricity, gas, telecommunications, postal and railway infrastructure. It is tasked with ensuring competition, grid stability, security of supply and “non-discriminatory access” to these networks.

By preparing to intervene directly in energy distribution during a future shortage, the agency is moving from guaranteeing a secure power supply toward rationing scarce electricity. In an emergency, it would have to systematically disconnect industrial users from the grid and decide which households and businesses would receive power and when. Until now, such conditions were associated mainly with communist states.

Supply Is Secure, Officials Insist

The agency insists that the electricity supply will remain secure, while conceding that additional dispatchable generating capacity must be built and that more consumers will need to adjust their usage in response to electricity prices.

The government is planning new power plants but must obtain EU approval before they can be built. At present, they have neither been approved nor constructed. Capacity mechanisms are also being developed, along with measures to manage demand.

In practical terms, this means that during a shortage, drivers may find that their electric cars have not charged overnight. Under normal circumstances, demand is shaped by prices, grid fees and incentives for flexibility. In an emergency, the government intends to intervene directly.

The aim would be to prevent an uncontrolled blackout by cutting demand in advance. That may sound sensible, but during a serious shortage, production in energy-intensive sectors such as chemicals, steel and other metals, cement, glass, paper and refining would have to stop. Plants would stand idle and employees would be unable to work.

A reliable power supply has until now been a genuine competitive advantage for Germany’s high-cost industrial base. Under such a system, that advantage would become a thing of the past. It also remains unclear who would bear the cost of the resulting production stoppages.

A Secret Rationing Platform

The planned secret Electricity Security Platform is not yet online. According to the Federal Network Agency, it is designed to prepare for a prolonged electricity shortage by systematically registering major consumers, assessing how much energy they could save and, where necessary, ordering cuts in consumption.

This amounts to a system for rationing electricity in what is officially presented as an exceptional scenario, but one the agency evidently regards as a realistic possibility.

The Gas Security Platform is already publicly accessible. Meanwhile, the outlook for natural gas supplies is deteriorating. Storage levels are historically low and replenishment is slowing.

This does not yet amount to a gas shortage. However, it leaves the country more vulnerable next winter to cold weather, import disruptions and price increases.

Officially, the Federal Ministry for Economic Affairs and Energy considers supplies stable and secure. Yet the ministry itself cites import dependence, storage levels, liquefied natural gas capacity and government contingency mechanisms as the principal safeguards.

A System with Little Margin for Error

The situation has not yet reached crisis point, but the system remains structurally fragile. The liquefied natural gas terminal off the island of Rügen, for example, was inaccessible for weeks last winter because of pack ice, leaving it unable to receive shipments or feed gas into the grid.

An incident of this kind can be enough to trigger a gas shortage when the supply system is already operating with little margin for error. The risk is all the greater because the federal government’s strategy increasingly relies on imports rather than storage.

Oil prices are a third source of pressure. They rose sharply in recent weeks before easing slightly today. Nevertheless, Brent crude remains close to $84 a barrel.

Higher oil prices raise the cost of petrol, diesel, heating oil and a wide range of industrial processes. With refining capacity limited in Western Europe, any decline in crude prices takes much longer to reach consumers at the pump.

Europe’s Shrinking Refining Capacity

Across the EU, the United Kingdom, Norway and Switzerland, primary refining capacity has fallen by 129 million tonnes a year since 2009. In 2023, 75 major refineries remained in operation, with a combined annual capacity of 677.3 million tonnes.

Between 2009 and 2013 alone, 13 EU refineries closed in whole or in part, reducing the bloc’s refining capacity by about 10%.

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The main problem was not outdated technology but a lack of competitiveness. Energy and operating costs at European refineries rose far more sharply than in other parts of the world. High energy prices are therefore undermining the continent’s self-sufficiency by driving production abroad.

Europe once imported substantial quantities of Russian diesel and other petroleum products. Since February 2023, however, an EU embargo on Russian petroleum products has been in force.

As a result, the bloc has had to source more of its fuel from refineries in the United States, the Middle East, India and elsewhere, leaving it more dependent on global supplies of refined petroleum products. When refineries go offline anywhere in the world, European buyers immediately find themselves competing with other importers. Motorists see the result at the pump.

Competitiveness at Risk

The consequences are particularly serious for Germany’s industrial base. High electricity prices, volatile gas costs and rising fuel prices not only constrain consumer spending but also erode the country’s competitiveness.

Energy is therefore no longer merely a question of keeping homes and businesses supplied. It has become crucial to the prospects of the economy as a whole.

German industry pays around 17% more for electricity than the EU27 average. Meanwhile, gas prices in Germany and Europe are more than four times as high as those in the United States and Canada.

A new study by Manuel Frondel of Ruhr University Bochum, commissioned by the Initiative for a New Social Market Economy (INSM), shows that government policy bears much of the responsibility.

INSM managing director Thorsten Alsleben commented: “Germany has a very real energy price problem, and it is home-made. As a result of political decisions, companies here pay significantly higher energy prices than most of their competitors abroad.”

“Energy, Energy, Energy!”

Alsleben added that the government was driving up energy prices through excessive taxes, charges and levies. He described the coal phase-out as a major mistake and called for it to be halted. He also urged Germany to return to nuclear power.

His remarks echo Reform UK leader Nigel Farage’s recent response at the Alliance for Responsible Citizenship conference in London when asked how he would improve manufacturing productivity and reindustrialize the United Kingdom: “Energy, energy, energy!”

Farage argued that only affordable, reliable energy capable of providing baseload power could sustain productive industry, artificial intelligence infrastructure and economic growth.

Germany, meanwhile, is preparing to ration energy that is already exorbitantly expensive.