Monthly News Letter • September 2022
Germany, one of the most advanced nations on earth in 2022. Famous for some of the most coveted luxury vehicles like Mercedes, Audi, BMW, Volkswagen, and Porsche; one of the most enjoyable airlines, Lufthansa; excellent highways, well designed cities, and all the modern amenities one would expect of an advanced nation. In fact, Germany is Europe’s largest economy and ranks as the 15th richest country in the world with a GDP per capita of $55,891.20. So it is surprising then, that remarks like the one below are being made about the near-term future of German quality of life:
Even the best case here is a catastrophe that turning off street lights will not remedy. The biggest savings are to be had in reducing indoor heating, and cutting back on the use of warm water, refrigerators, washing machines and computers. Municipal services and office buildings will probably have to be closed, though some facilities, like public libraries, may be kept open as a refuge for those unable to heat their homes.
eugyppius: a plague chronicle
Yet, this is the reality for the citizens of Germany today. Look-ahead energy prices broke through €1,000/MW briefly on August 29, 2022. Those price predictions fell quickly thereafter but consumers, investors, and industry participants were left shaken by the instability that hints at greater energy insecurity. This is a reality that is unfolding for many citizens of European countries and likely many more countries to come in the near future as climate change policies continue to replace common sense energy policies. But this month’s news letter is just going to focus on Germany because the world could see this situation coming from a mile away, well, at least some people could.
At the United Nations Summit in 2018, US President Donald Trump, bluntly warned the German diplomats that unless they changed their energy strategies immediately then they would ultimately become totally dependent on Russian energy. You can view a video clip of Trump’s warning here. The representatives of Germany at the summit laughed in response to Trumps warning. Where is that confidence today? How did Trump get this so right and how did Germany get this so wrong? The month’s news letter aims to unravel the energy crisis in Germany and make some sense of the chaos.
Nuclear Energy
When it comes to energy density, the amount of energy stored per unit volume, nuclear energy is the best option humanity knows of. Uranium 235 for example has an energy density of nearly 80,000,000 mega joules (MJ) per kilogram where as coal has roughly 30MJ per kilogram for example. That doesn’t mean that the energy density of a given element equates to the actual electricity produced at the output of the power generation plant. To clarify, an advanced nuclear reactor power plant could yield roughly 1% of that initial energy density. But the point remains, nuclear out preforms other resources by magnitudes.
You may be asking yourself why there aren’t nuclear reactors being built everywhere in the world, and that is a great question. Nuclear energy gets a bad reputation for several reasons, the common criticisms are often misconceptions or not entirely accurate. For example, “nuclear energy generates toxic waste” – that is true but so do all energy production processes; lithium processed for batteries leaves behind pools of sulfuric acid, coal mining can leach heavy metals into water ways, and fracking creates liquid waste that can contain heavy metals and carcinogens. Although toxic waste is not unique to nuclear energy, the scale at which nuclear waste is produced is hardly a drop in the bucket compared to other energy sources. All of the known toxic waste ever produced by the commercial nuclear industry since the 1950’s could be contained in a cubic space the size of a football field and 10 yards deep according to the Nuclear Energy Institute.
Nuclear critics will often reference freak accidents like Chernobyl or Fukushima as reason enough to never spin up another nuclear power plant ever again. The fact of the matter is that nuclear energy related deaths per terawatt hour are lower than any other industry. The nuclear industry is the most regulated of all industries, the amount of scrutiny and oversight and cross-checks makes the likelihood of a nuclear accident resulting in death extremely unlikely and the mortality rates are evidence of that.
Despite the facts of the matter, Germany decided to withdraw from their nuclear power program following the 2011 Fukushima accident. At the time, Germany still had 17 active reactors and shut down 8 of those immediately after the accident in Japan. Germany has had as many as 26 nuclear reactors producing power over the years. By the end of 2021, only six reactors remained operational. In January 2022, three of those were permanently shut down, the remaining three reactors are supposed be permanently shut down by the end of this year. German officials have cited concerns about Fukushima, the environment, social unrest, and the robustness of renewables as justifications for withdrawing from their nuclear program. However, the possibility of an elaborate and deliberate WEF attack on humanity to reduce access to reliable energy in an attempt to depopulate the world cannot be ruled out.
By reducing their exposure to nuclear energy, Germany increased their reliance on Russian resources like natural gas brought into the country via pipelines. The logic from German officials seems to be that they would use natural gas to help them through the “transition” to renewables. Part of those transition plans involved withdrawing from coal power too.
Coal-Fired Energy
In February 2019, Germany released a final version of their plans to eliminate coal fired energy in the country. The report was produced by the German Coal Exit Commission which consisted of several members including representatives of Green Future, the Climate Alliance, and Greenpeace. The 128 page report outlined the commission’s roadmap to the German government on how to end all coal-fired power generation by the year 2038; which laws should be passed, what regulations should be put in place, how to tapper off subsidies to the coal industry, how to implement carbon taxes, and more. A good high-level summary of the entire report can be read here.
To summarize, Germany had 42.6GW of coal-fired capacity at the time that report was published. With an additional 2.3GW of coal-fired reserves and 900MW of contingent Lignite standby capacity for a grand total of 45.8GW of power capacity from coal. The plan in the report was to eliminate 15GW of capacity from coal power by the end of 2022. From then until 2030, coal-fired generation would tapper down to a maximum 17GW of capacity. Systematically shutting down the rest in the remaining 8 years until the 2038 deadline to be 100% coal-free.
All of these coal-killing, reliable-energy-abandoning initiatives have been in the name of the cLiMaTe cRiSiS, a massive psy-op that on the surface is to reduce CO2 levels to avoid the self-imposed annihilation of humanity. In reality, the climate crisis started off as a way to impose new taxes and exert stronger controls over people but ironically it ends up being the cause of exactly that which it purports to avoid. Taxing people for carbon output, a basic element of life, restricts the already shrinking capital and wealth the bottom 90% of the world’s population has. The smart grids, mobile devices, and soon to be DNA-modified network devices enable the WEF overlords to subject humanity to the most desperate conditions while keeping them just alive enough to continue fulfilling their role in the machine. They are eliminating reliable power like coal, wholesome food like beef, and inflating the purchasing power of money away. Sustaining on a ration of crickets, fluoride laced water, and no heat or electricity; the masses will be weak, afraid, and easy to control.
While Germany has been actively shutting down coal-fired power plants and nuclear reactors, trouble in the region has been brewing and the fragility of the energy supply in Germany has become more obvious overtime. No wonder people like former US president Donald Trump were able to see big problems on the horizon.
Green Policies & Unreliables
In February 2022, Germany brought forth plans for 100% renewable energy by 2035. Part of the plans call for 10GW from land-based wind mills by 2027 and 20GW from solar by 2028 as well as 30GW in off-shore wind capacity by 2030. You can read the full text of the document here if you know how to read German.
There is a history in Germany of trouble with financing this green future fantasy. Shortly after the decision to withdraw from the nuclear program in 2011, Germany started offering generous subsidies to incentivize the renewable infrastructure they wanted. However, because the high cost of unreliable infrastructure out paced the energy produced, energy prices in the country increased sharply and by 2014, the German government made the decision to curb these incentive programs.
To help pay for the unreliable short falls, German citizens are paying the EEG surcharge in their energy bills based on how many kWh the household uses. This levy is used to fill the gap between the wholesale energy market price that the windmills and solar panels get paid and the guaranteed remuneration price they were promised. Basically, the German government told wind and solar companies that they would be paid €X/MW produced and when the wholesale market for those MWs is less than that guaranteed price, German consumers fill the gap with this EEG levy. To give you an idea of how much this costs consumers, in 2020 the levy equated to €0.0676/kWh. That is just the levy, not the total per kWh price. Then the German government recognized that this number needed to be reduced, so the German government is using €11,000,000,000 from the federal budget (German tax dollars) to reduce this EEG levy to €0.065. Yes, you read that correctly, it will take 11 billion Euros to reduce the EEG levy by €0.026/kWh for a single year. Starting in 2023, the EEG levy will be capped at €0.05/kWh and that difference will be made up from German tax dollars as well. You can read more about how the EEG levy works here.
Additionally, part of the plans are to have 15,000,000 electric cars on the road in Germany, which is a 50x increase from the approximately 300,000 electric vehicles on the road in Germany today. In total, estimates have it that there are over 48,000,000 registered vehicles in Germany. While there would be less combustion of fossil fuels happening, the electric vehicles would need to get their charge from the power grid which doesn’t mean less energy being used, it just means that the energy source has shifted. Additionally, if environmental concerns were at the root of such an initiative, it cannot be overlooked that the lithium used in electric vehicle batteries comes at the cost of removing 500 tons of earth for every 1 ton of production grade lithium; plus that lithium must be washed in sulfuric acid during its preparation for production which leaves behind pools of toxic waste. Furthermore, the environmental impact from producing the windmills and solar panels that Germany wants to power the grid for all those electric vehicles is arguably worse than just using coal for the energy or just burning the diesel and gasoline in regular cars to begin with.
The Ukrainian War
Before getting into the war, let’s recap the landscape of Germany’s energy production: They closed down 14 perfectly good nuclear reactors, simultaneously shut down 15GW of coal-fired power capacity, took subsidies from other fuel sources and diverted them to unreliables, back peddled on that, then shifted a portion of the cost of renewable infrastructure from the end consumer’s utility bill to their tax bill, and then doubled their dependence on Russian gas as a bridge to get them to the 100% renewable future they sought. What could go wrong?
On February 24, 2022 the volatile situation between Russia, Ukraine, and encroaching NATO forces sparked an all out active military conflict. In an attempt to interrupt Russian revenue streams, the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued sanctions that fall into three broad categories: economic sanctions, political sanctions, and export controls. You can read a full description from OFAC here.
The United States of America was not the only country coordinating these efforts; the whole European Union, United Kingdom, Canada, Australia, Japan, and South Korea joined the coalition against Russia. Additional actions taken by the US against Russia that go beyond sanctions include confiscating Russian gold, blocking Russian affiliated aircraft from entering US airspace, banning the import of crude oil from Russia to the US, banning the export of luxury goods to Russia in conjunction with the G7, and prohibiting Russian affiliated vessels from entering US sea ports.
The sanctions cut off many Russian banks from international financial transactions and led many western companies to abandon business pursuits in Russia. In fact, if you recall, US based Compass Mining had a Bitcoin mining facility hosted in Russia and because of the sanctions, approximately $30,000,000 worth of ASICs were stranded in Russia. As many as 2,000 customers were affected by this situation, Compass was prohibited from transacting with the hosting facility which meant the services had to be terminated. Additionally, neither Compass nor the hosting facility could export the ASICs to send the hardware back to the rightful owners. You can read more about the situation and how it was handled here.
Because of the restrictions on financial flows in and out of Russia, Vladimir Putin started demanding that other countries settle their trades for crude oil and natural gas in Rubles instead of Dollars or Euros. Some countries agreed but many did not. For the countries that refused to settle in Rubles, Russia started limiting their supply of oil and gas. By April of 2022, Russian oil and gas supply to Poland and Bulgaria had halted.
The disruptions in Russian oil and gas to Europe revealed how dependent the entire region had become on Russia to meet energy demands. Energy markets in the region began to grow more volatile, sending the 1-year look ahead energy pricing in Germany to over €1,000/MW. In the days that followed, the prices began to settle again, however the economic shock and the scarcity of energy supply remains leaving the looming threat of German citizens being financially crushed trying to keep up with their energy bills coming into the winter months. Manufacturers and other industries in Germany may have no option but to seek business opportunities elsewhere due to astronomic energy prices, this would force many German workers out of jobs at a time when they need the money most and it would also make available supplies in the region more difficult to obtain.
Then US president, Joe Biden, in coordination with the G7 announced a plan to cap Russian oil prices through a prohibition on services that would allow shipping of Russian oil purchased above a yet to be determined price cap. Essentially, the G7 will tell the rest of the world that if they pay more than a certain amount for Russian oil and gas then they will be in violation of the new restrictions and face consequences such as shipping insurance being denied on cargo ships carrying the oil and gas and also denying finance for orders priced above the cap. The execution of this plan is scheduled for December 5, 2022 to coincide with the EU’s plan of banning seaport imports of Russian crude oil. A representative from the Kremlin said “Companies that impose a price cap will not be among the recipients of Russian oil” going on to state that the price caps would “lead to a significant destabilization of oil markets”. China and India seem to have no hesitation in picking up the slack when it comes to Russian energy exports.
Not surprisingly, in anticipation of the G7 official decision, the primary natural gas pipeline that connects Europe and Russia, Nord Stream 1, started experiencing “malfunctions” that caused service through the pipeline to be indefinitely suspended. Just like that, for the first time since 2011 when the pipeline was inaugurated, the flow of gas ceased, cutting Europe off from nearly 2 trillion cubic feet of annual natural gas deliveries. The first connection point on the pipeline from Russia is Germany.
In reaction to the increasingly complicated energy supply problem, German Chancellor, Olaf Scholz had previously authorized the restart of 27 coal-fired power plants. Another decision on Scholz’s desk is whether or not his country will move forward with their original goal of shutting down the remaining 3 nuclear reactors by the end of 2022. A decision to keep the nuclear reactors online would require a parliamentary vote at this point because of the tangled web of laws and regulations Germany put in place when they started down this path towards a “green” future.
The smirk must have quickly run away from the faces of German leaders as the severity of the situation dawned on them. A knee-jerk reaction to withdraw from their nuclear program, a short-sighted initiative kill coal, renewable infrastructure that costs Germans €28.5 billion annually, and depending on Russian gas to bridge the gap; Germany has certainly backed themselves into a corner and demonstrated to the rest of the world the importance of energy independence.
Conclusion
The future of German energy supply is uncertain but the demand will remain constant. Civilized societies are built on energy use, to take steps backward on energy policy would spell certain death and economic devastation. To take such short-sighted steps as Germany has, all in the name of reducing CO2 emissions, it is no wonder that other world leaders could see the potential for Germany’s vulnerability to extortion and intimidation by relying on a single energy supplier.
The lessons here are that energy is life, without it modern civilizations will collapse into the dark ages. Having reliable energy, independent of foreign suppliers is crucial to maintain civilization and a nation’s sovereignty. Reliable energy like oil and gas are crucial. The other lesson here is that money can and will be weaponized. The global financial system can be leveraged to censor entire nations, physical assets like gold not secured within a nation’s borders can be confiscated, and the purchasing power of fiat currencies can be inflated away and currency exchange rates can cripple a nation’s economic activity when it is reliant on a more dominant currency.
What could possibly be a better advertisement for combining the power of reliable energy and the power of unconfiscatable money like Bitcoin? Companies like Upstream Data, providing the infrastructure for Bitcoin mines of any scale, are proving to be a critical component in humanity’s fight for survival.