As Russia Cuts Gas, German Industry Grapples With Painful Choices

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The German companies that drive Europe’s biggest economy are contemplating painful cuts to their output and resorting. To polluting forms of energy previously considered unthinkable as they adjust to the prospect of running out of Russian gas.

Chemical giant BASF (BASFn.DE) is working out which factories could cut output first and rival Lanxess (LXSG.DE) may delay shutting some coal-fired power plants.
The 86-year old Bavarian-based supplier of viscose fibres used in hygiene products and filtration has asked the state to help fund the retrofit that would cost at least 2 million euros ($2.10 million).
The economic situation has continued to worsen and our available reserves are rapidly depleting,” executive Wolfgang Ott said.
“Oil has only one advantage: supply is secure,” he added, saying a plant retrofit would take 6-8 months.

Ott added the group was also in talks about credit lines from state-lender KfW (KFW.UL), which has drawn up a support scheme for companies hit by a surge in gas prices.
The companies are among the country’s energy-intense firms that pay 17 billion euros for energy each year.
Until Russia’s invasion of Ukraine began on Feb. 24, they were focus on reducing carbon emissions in line with Germany’s efforts to meet EU climate goals.
Now the overwhelming priority is survival, even if that means a slow-down in efforts to tackle global warming.

Germany’s Economy Minister Robert Habeck, a member of the Greens, said a higher reliance on coal as an energy source would cause Germany’s carbon footprint to grow.
This cannot in any way please anybody who walks through today’s world with open eyes,” he said.
Historically, both oil and gas cost more and coal was the cheapest way to run a power plant. Now, all energy is expensive and markets are volatile making calculations extremely difficult. European power and gas prices have hit records in response to the concerns over Russia’s invasion of Ukraine.

HOW BAD WILL IT GET?
Germany triggered the alarm stage of its emergency gas plan on Thursday but stopped short of changing the law to allow energy companies to pass on higher prices to consumers and businesses.
The country’s energy regulator on Tuesday outlined plans to cut industrial gas usage through a tender system that would encourage manufacturers to consume less.
Provided supply does not fall below 50% of the site’s maximum natural gas demand, BASF could continue to operate Ludwigshafen, which spans around 200 production sites and needs 6 terawatt hours of electricity each year, but at reduced capacity.
The exact reduction would depend on the availability of gas, as well as oil as a substitute, BASF told Reuters, but said if supply were to drop significantly below 50% over a sustained period, it would have to shut production.
This, it said, would hurt its carbon footprint.
-Reuters.

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