international analysis and commentary

How Germany, Belgium and the Netherlands will cope this winter

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The war in Ukraine and the global energy crisis are clearly impacting the Netherlands, Belgium and Germany. All three prepared for the winter, having governments keen on protecting consumers from soaring energy prices. How did their approaches differ and what is working so far?

“We won’t leave anyone alone,” said German Chancellor Olaf Scholz in a press statement over the summer. “This really applies to everyone: for all citizens, but also for the companies in our country.” Scholz announced his government’s measures to strengthen German consumers and companies in the energy crisis that has unfolded since the Russian invasion of Ukraine. “We will also noticeably relieve the burden in the future: through a housing benefit reform with a permanently integrated flat-rate heating fee and a citizens’ benefit, which will come on January 1, 2023. I can assure you: We will do whatever is necessary, as long as it is necessary. If we hold each other tight, we’ll get through this time in a stable matter.”

The soaring gas and energy prices for German consumers have obviously been a major concern for the federal government in Berlin. In the aftermath of February 24, Germany had to rethink its energy strategy. Since the beginning of the 2000s, the country invested in renewable energies, such as solar power and wind energy. By 2022, more then 18% of the gross final energy consumption was sustainable. Yet, the Germans focused heavily on buying relatively cheap Russian gas in order to replace nuclear and coal energy. When the war started, this energy strategy had to change.

In the following weeks, the opposition CDU party proposed to cut Germany off from Russian gas, completely and immediately. Scholz did not want to take quick decisions, so he chose a different roadmap out of the crisis: Berlin would keep buying Russian gas to fill up its reserves before the winter; the German branch of the Russian oil and gas company Gazprom would come under German government control, in order to guarantee delivery; and coal and nuclear power plants destined to shut down would stay open longer.

 

Read also: Chancellor Scholz’s leadership style and the uncertain future of his coalition

 

During the spring and summer of 2022, the Russians closed the important North Stream pipeline several times, citing “repairs”, leading to less or even no gas arriving to Germany. Filling up German gas reserves, thus, became a challenge. Berlin reacted by calling on everyone in the country to downsize energy use. Then, Scholz and other ministers travelled the world to strike deals with other LNG producing counties, such as Israel, the US and Qatar, which by now are funnelling gas into a newly built LNG port in the north. The result of these efforts: the gas reserves are full and Germany is ready for winter.

Germany’s Olaf Scholz

 

Gas price brake: the German way

Though Scholz promised to leave no one alone and “to do whatever is necessary, as long as it is necessary”, it was not easy to compensate consumers and companies for higher energy prices. Several laws had to be changed and that was not easy due to German government structures. Before the end of the year, students and pensioners will receive a lump sum payment. In addition, the federal government wants to take over the monthly bill for gas consumption of households and companies. This is a mammoth task because the government has to determine the annual consumption of more than 20 million private and several thousand industrial customers, and then divide this by twelve months.

In 2023, the government wants a permanent price break for electricity and gas. Because of the changing process of laws, the price brake would come into effect on March 1, 2023, with compensation being paid for January and February. The so-called “gas price brake” would cost the state more than 50 billion euros in the planned period up to spring 2024. The money would be paid from the Economic Stabilization Fund, for which the parliament recently approved credit authorizations – totalling the extra debt into 200 billion euros.

 

The uncertain Dutch path

Challenges in the Netherlands linked the energy crisis are somewhat different. The country used to rely on its own gas fields, so Russian gas was not such a necessity. Due to earthquakes and damage in the northern province of Groningen, where the biggest gas field is situated, the Dutch government decided to cut off the overall majority of gas production and rely more on foreign gas. Since the energy crisis began, letting the Groningen gas field “do its work as before” was a very tempting idea. However, the government chose to import more gas from outside and the Dutch gas reserves were filled up before winter.

Like in Germany, households and companies in the Netherlands will be compensated the high energy prices. Minister Rob Jetten (D66) for Climate and Energy Policy worked out a plan: a maximum energy bill for everyone. Whereas the Germans call this “price brake”, the Dutch call it a “price ceiling” – the devil is in the detail though. The temporary price ceiling will apply throughout next year to all households and other customers with “a small-scale consumer connection to the electricity and gas network or a connection to a heating network,” so announced the government recently.

The Dutch do not have to do anything themselves, because the energy companies will implement the scheme. The price and consumption ceilings are as previously announced by the Dutch cabinet: “1.45 euros per m3 of gas up to an annual consumption of 1200 m3 and 0.40 euros per kilowatt hour of electricity up to an annual consumption of 2900 kWh. For households connected to a heat network, it is 47.38 euros per gigajoule (GJ) up to an annual consumption of 37 GJ.” It all sounds very technical and complicated, but according to the government, this formula should be the best one. Each energy bill depends on how much energy one uses. For many this tool is not clear enough, because it can’t exactly predict how high their energy bills will be in the end.

Rob Jetten with Netherlands’ prime minister Mark Rutte

 

Nuclear bombshell

Belgium is a country without gas fields – like others in Europe. In the first decades after World War II, the government constructed seven nuclear reactors that Belgians rely on for their energy. Gaps are filled with nuclear energy from France and gas from surrounding countries, such as the Netherlands – which is obliged to deliver gas due to contracts. In 2003 the federal government decided to close down all Belgian nuclear power plants for environmental and technical reasons – some of them were not completely safe and had to be shut down temporarily.

The plan to stop nuclear energy production and invest in renewable energy has not worked out well. Six out of seven power plants are still open. Why? The federal government hasn’t been determined enough to make new policies, construct sustainable alternatives for nuclear and take final decisions. For instance, after the last federal elections, it took 1.5 years to form a new government with seven Flemish and Francophone parties, including the Greens, who still desire to close all working Belgian nuclear power plants.

Once the Russian invasion in Ukraine was a fact, and the energy crisis came about, the plan to stop Belgian nuclear energy became a political bombshell. Like the Netherlands, Belgium has filled up its gas reserves and is ready for winter, so says Prime Minister Alexander de Croo. A nuclear full stop again has been delayed. Opposition parties, however, have been critical of the Prime Minister. “How long are you going to fool the population?” independent parliamentarian Jean-Marie Dedecker asked. “This government succeeds time and again in pushing the decisions ahead of itself, in fact to make a core entry almost impossible,” said Bert Wollants of the Flemish N-VA.

Prime Minister De Croo answered, “In our country, neither the heating nor the lights will go off.” He referred to countries such as France and Switzerland, where the government is considering possible shutdown plans for this winter. No supply problems are expected in our country this winter, so he says. “In some countries, people are currently working on how they will get through the winter. In our country, we are looking three winters ahead,” says the Prime Minister. “Others are working on a shutdown plan, we are stepping up to make sure that we can offer certainty in uncertain times.”

 

Pan European plan?

The Belgian government will also compensate consumers and companies for high gas prices. In addition, Belgium is counting on a pan-European energy plan to fix the problem of high-energy costs.

 

Read also: Why the US needs to play a larger role as swing producer of oil and gas in the current crisis

 

Together with fifteen other EU countries, it is fighting for a European price ceiling, a plan that countries like the Netherlands and Germany (as well as Denmark) are not enthusiastic about because of their strong positions on the gas market. This month, the European Council will have to come to a decision, also for the winter of 2023-2024.