Halt to Russian gas supply – consequences for German industry

The assignment

With an import quota of 89 percent, the German natural gas supply is almost entirely dependent on foreign supplies. In 2021, deliveries came mainly from Russia, followed by Norway, the Netherlands, and other supplier countries.

For the vbw – the Bavarian Industry Association, our team of economists and gas experts examined the following in a scenario calculation:

• What happens if Russian gas supplies to Germany fail from 1 July 2022?

• What would be the economic consequences for German industry if Russian gas supplies were to be interrupted?

Our approach & methodology

With the scenario, we look at the impact of a gas supply disruption and the economy in a comprehensive sense. The project team’s approach comprises two steps:

1. Energy-economic analysis
   
   In the initial approach, an energy-economic analysis is carried out. The first step is to analyse the sources and to determine how large the supply gap could be if Russian gas supplies were to fail from 1 July 2022. Subsequently, gas consumption is presented in a differentiated way according to gas-intensive production processes and sectors and the savings and substitution possibilities of the most important production processes are shown. On this basis, the gas balance for the year 2022 can be drawn up in the event of a supply interruption.

2. Consideration of direct as well as upstream and downstream effects
   
   In a second step, the economic side is considered, in particular the effects of value added and employment in Germany. The impact of the industries directly affected by a supply interruption is examined and the effects in upstream and downstream sectors are evaluated.

Special features of the study

• Monthly evaluation of available gas quantities and demand

• Consideration of the current Gas Storage Act (May 2022)

• Differentiation between protected and non-protected customers according to the Energy Industry Act

• Consideration of consumer savings, differentiated by industry branch

• Consideration of the process level, e.g. production of raw materials, glass production, etc.

• Consideration of economic interdependencies through input-output analysis

The study thus specifies for the first time the concrete consequences of a gas supply stoppage in a high degree of detail and supplements earlier initial calculations in which no distinction was made between consumer groups and processes.

Key assumptions

The scenario has been designed to be as specific as possible (e.g. selection of a specific date as the start of the delivery stop) in order to be able to quantitatively estimate the effects. All assumptions are made transparent.
Many of the assumptions (e.g. 90 % storage level up to 01.11.2022, despite the absence of Russian supplies; available quantities of LNG) could be set differently. Further scenarios are therefore possible and useful.   

Core results

If Russian gas deliveries fail from 1 July 2022, German gas supplies will have to manage with supplies via western border crossing points and from storage facilities. If at the same time, storage tanks are to be filled in accordance with the Gas Storage Act, gas supplies will probably not be sufficient to meet the requirements of all customers as early as July.

Priority will then be given to the protected customers in accordance with the Energy Industry Act (including private households, social services, and district heating systems). Based on the assumptions made in this study, the demand of protected customers can be met to 93 % in the second half of 2022. The shortfall is likely to be covered by measures taken by the federal load distributor and the customers themselves.

Effects on unprotected customers

A delivery shortfall from 1 July 2022 means that from July to December on average only around 37 percent of the demand from non-protected customers can be covered. In the sectors directly affected, this leads to a loss in value added of 3.2 percent of the total economic value added in the six months under review. Glass/glassware and pig iron/steel industries are particularly affected by a loss of supply. Here, value added falls by almost 50 percent.

Effects in other industries

Delivery losses are spread across the economy. The upstream and downstream effects are three times higher than the direct effects, with a total decline of 9.4 percent of the total economic value added. Relative to the direct effects, the indirect effects are thus similarly high to those in other studies.

Overall, in our scenario, the negative effects amount to 12.7 percent of Germany's economic output in the six months under review.

Links and Downloads

On the vbw website you will find (in German):

Study (PDF)

Learn more

Press release

Please send press inquiries about the study to vbw:

Mail: presse@ibw-bayern.de
Tel.: +49 (0) 89 551 78-371

Project team: Markus Hoch, Jens Hobohm, Dr Michael Böhmer, Dr Alex Piegsa, Dr Fabian Muralter, Sebastian Lübbers, Jan Limbers, Dr Andreas Sachs, Philipp Kreuzer
 

Last update: 28 June 2022