| dc.description.abstract | This paper analyzes the question of shale gas production in Germany aimed at aiding the
power generation sector in its compliance with the country’s greenhouse emissions reduction
goal, one of the pillars of the nation’s energy transition (Energiewende). After discussing the
key characteristics of natural gas markets and unconventional gas, and the chief constraints
faced by the country as it attempts to increase the share of renewables in its electricity mix,
we begin our analysis of the costs and benefits of shale gas production in Germany.
We begin our analysis by defining how much natural gas will be needed in future decades for
electricity generation under different scenarios of energy efficiency and renewables
penetration in the electricity mix, and project the amounts that can be produced domestically
using existing conventional reserves. We find that in all cases, a significant amount of natural
gas will be imported during the 2020s and 2030s, and that demand for natural gas will
increase in following decades in scenarios with low to medium renewables penetration.
Through an analysis of potential shale gas reserves, we determine that, given the relatively
small quantities that can be extracted, German shale gas alone cannot significantly shift the
supply curve outwards and lower prices, and that the primary benefits will be strategic.
By projecting the possible evolution of natural gas import prices, we calculate the degree to
which shale gas production could aid Germany in maintaining its trade surplus. We find that,
while shale gas could reduce imports by up to € 10.76 billion per year, electricityMrelated gas
imports alone are unlikely to tilt the country’s trade balance into a longMstanding trade deficit.
On the issue of energy security, we find shale gas to be helpful in reducing the country’s
exposure to foreign sources – by up to 40.3% over the studied period. However, we also
identify a number of alternative solutions that Germany can apply in order to reduce its
supply risk, making shale gas less of a stringent necessity and less of a game changer.
A final benefit we identify from shale gas is the positive effect it can have on employment
levels and investment in the regions it interests. This, coupled with the rise in government
revenues through taxes and royalties, could play an important role in changing public
opinion’s perception of shale gas and hydraulic fracturing, and is in line with the
Energiewende’s secondary goal of maintaining competitiveness and employment levels high.
On the cost side of our analysis we find environmental damage, primarily with regards to
groundwater contamination. While less likely than in North America due to local geological
conditions, accidents of this kind will have much stronger consequences in Germany because of the region’s higher population density. While prevention is possible, moreover, risk cannot
be eliminated altogether.
In conclusion, we find shale gas production to be a potentially useful tool in tackling some of
the challenge posed by changes in the worldwide energy market and by Germany’s energy
transition. However, our analysis suggests that it will not be the game changer it was in the
United States.
Throughout our analysis, additionally, we stress the importance of a favorable legislative
environment: was the German government to decide that shale production is a desirable
choice, taxation mechanisms and environmental restrictions would have to be set up in order
to ensure that the endeavor is potentially profitable for companies – thereby sparking interest
in investment – and not dangerous to the local population. | nb_NO |
