Questions & Answers

What role will shale gas play in the German Energiewende?

International onlookers sometimes wonder when shale gas will get going in Germany. Americans in particular think, based on their own shale boom, that the Germans could reduce their carbon emissions and lower their energy prices with shale gas. The situation looks much different within Germany.

Germany is currently investigating the option of shale gas production. At present, a few projects are underway, but drilling is only allowed if the shale gas to be recovered is at least three kilometers deep (in order to protect groundwater). Depending on the outcome, shale gas production might be allowed, but no decision is expected until the end of this decade. Moreover, numerous parties in Germany - such as beer brewers, who are concerned about the purity of their groundwater - oppose fracking.

In Europe, shale gas is unpopular. France has already put a moratorium on it. The German government believes that shale gas production can proceed “as soon as environmental concerns are assuaged” – which could be a diplomatic way of saying “never."

German shale gas reserves are estimated to be large enough to cover 13 years of the country’s gas supply. Of course, the country would not shut down all imports of gas for 13 years, nor would it make sense to do so. Rather, domestic reserves would be stretched across decades, offsetting imports in the process.

During that time, we would run the risk of contaminating ground water and the environment. In the US, dozens of families have been affected by individual wells. Because Germany is so much more densely populated, thousands could be affected in single cases. Germans therefore wonder why they should take the risk just for 13 equivalent years of slightly more energy independence.

One reason could be lower prices. In the US, gas prices dropped, but only in parts of the country; the US does not have not a contiguous gas network. Germany, in contrast, is part of a gas network connecting Russia to the Netherlands; northern Africa is connected to Mediterranean Europe. If shale gas were made available, it could be sold to the highest bidder through a large network of buyers, so prices would not drop.

Indeed, gas prices are currently pegged to oil prices in Germany, so gas prices alone cannot fall independent of oil. But even if this pegging were done away with, gas prices would not fall because the gas could be sold on such as large market; Germans would just be taking risks with their environment so that gas companies could post greater profits.

A publication by Friends of the Earth found that the potential of shale gas may also be overstated:

  • the five biggest gas wells in the US declined by 63% to 80% in the first year
  • industry has downgraded its reserves several-fold in recent years
  • firms such as BP, BHP Billiton and Chesapeake reduced the value of their shale gas assets accordingly by billions of dollars

In Europe in particular, FOE sees the aforementioned combination of population density and water scarcity as a general problem. Furthermore, a study conducted by the German development bank KfW bank found that the US industrial sector overall had not become more competitive than the German industrial sector during the shale boom largely because energy prices make up such a small share of total costs (two percent). However, the situation is different for a small number of firms that specifically consumer large amounts of natural gas.

Finally, low fossil fuel prices are not a goal of the Energiewende; keeping carbon in the ground is. As laudable as the efforts are to curb carbon emissions by switching from coal to shale gas, in the end we just take more carbon from the ground when we extract shale gas. What the world needs is an energy alternative that allows us to leave both fossil reserves in the ground. Germany is working on the most promising alternative now: renewables in combination with efficiency.