Germany’s Energy Transition: From Piped Gas to LNG and Renewables

By Laetitia von Schönburg

April 11, 2025 – Germany’s decision to end piped gas imports, mainly from Russia, and transition to liquefied natural gas (LNG) marks a profound shift in its energy strategy. While this move enhances energy security by reducing reliance on Russian gas, it comes with significant economic and infrastructural costs. The transition requires substantial investment in LNG infrastructure. It exposes the country to volatile global LNG prices and alters Germany’s energy market dynamics.

Historically, Germany depended on cost-effective Russian piped gas that provided, abundant energy and price stability. The complete cessation of Russian gas imports, particularly via Ukraine, has forced Germany to diversify its supply sources. The country now relies on imports from Norway, the U.S., and Qatar. However, LNG is significantly more expensive than piped gas, leading to higher energy costs. The price of imported LNG in Germany surged to $14.76 per MMBtu in early 2025, a 54.84% increase from January 2024. While Germany has invested heavily in LNG terminals like those in Wilhelmshaven and Brunsbüttel, the infrastructure still requires further expansion to meet demand reliably. Additionally, Germany’s need to secure long-term contracts with LNG suppliers remains crucial to avoid extreme price fluctuations.

From piped gas to LNG

Germany’s gas market shifted from a largely predictable, pipeline-based supply model to a more competitive and uncertain LNG-driven system. Previously, long-term contracts with Russia ensured adequate supply and stable prices, whereas LNG markets are subject to international demand and supply fluctuations. This transition from piped gas to LNG also requires significant investments in storage facilities and regasification terminals. Another notable change is the growing role of gas trading hubs. The German gas market is increasingly tied to global LNG pricing, making it susceptible to demand surges in Asia and possible supply disruptions in key exporting regions such as the U.S. and Qatar. Additionally, reliance on seaborne LNG imports increases exposure to shipping disruptions, weather-related risks, and geopolitical tensions affecting major maritime routes.

The economic consequences of this energy transition are profound. The spike in energy prices has led to inflationary pressures, particularly affecting industrial production and household energy costs. Energy-intensive industries, including chemicals, manufacturing, and automotive, are facing increased operating costs, impacting global competitiveness. Some companies are considering relocating production to regions with more stable energy prices. Additionally, the government has had to allocate significant resources to subsidize energy costs for households and businesses to prevent economic contraction. While diversification enhances energy security, the financial burden remains substantial.

The road to green energy

 As Germany tries to move towards greater reliance on renewable energy, efficient energy storage solutions become crucial. The country’s renewable energy strategy focuses on several storage technologies. Battery storage is adequate for short-term energy balancing, particularly in residential and commercial sectors. Pumped hydro and compressed air provide large-scale, long-duration energy reserves crucial for grid stability. Germany also invests heavily in hydrogen infrastructure to store excess renewable energy, particularly for industrial applications. Hydrogen could be key in replacing natural gas in steel production and transportation sectors.

Germany once relied on nuclear power as a component of its energy mix. Before the government decided to phase out nuclear power, reactors contributed approximately 12% of the country’s electricity supply. The final three nuclear plants were shut down in April 2023, eliminating a stable, low-carbon energy source. Critics argue that keeping nuclear power in the mix could have alleviated some energy cost increases by providing a reliable alternative to expensive LNG imports.

The road ahead

Germany’s transition from piped gas to liquefied natural gas (LNG) marks a turning point in its energy strategy, bringing both opportunities and economic challenges. The shift away from Russian gas eliminated energy dependence, but it caused soaring energy costs and inflationary pressures that negatively impact households and industries. To manage these challenges effectively, Germany must not only expand its LNG infrastructure but must also secure long-term contracts that provide price stability in an unpredictable global market.

Investing in advanced storage solutions and hydrogen infrastructure will be essential if the country wishes to advance its renewable energy agenda. These innovations will support the integration of renewables and help reduce reliance on costly LNG imports. Balancing energy independence, cost stability, and environmental goals will require a coordinated approach that combines significant new investment, policy foresight, and technological innovation. The success of this transition depends on Germany’s ability to adapt to a rapidly changing energy landscape while ensuring economic resilience and maintaining industrial competitiveness.

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Laetitia von Schönburg is a researcher with the Global Policy Institute. She was born and raised in Germany. She holds a Comparative Literature and Culture degree from Royal Holloway University of London. Her academic background includes the Middle Eastern Studies Program at the University of Saint Joseph in Beirut and the History and Culture of Korea at Korea University in Seoul.

 

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