The jury is out on the dilemma known as Green Transition,
whose German title “Energiewende” meaning-energy turnaround- is still the
subject of intense debate in the geoeconomics circle. As a policy measure it is
intended to do good. But things are getting awry.
Brief explanation of Energiewende is not out of place. The core idea is based on shifting from fossil fuel (nuclear power also included) to green energy or renewable energy system. The goals are as follows:
1. Net Zero Emission by year2045
2. Electricity consumption from green/renewable source be at-least 80% by 2030
3. Coal as energy source be phased out by 2038
Facts & analysis
All these loftier goals are good for only obtaining
electricity for both domestic consumption along with lighting and powering
factory infra-structure. When it comes to the question of producing fertilizer, it is not a boon but a bane.
For example, production of nitrogen fertilizer
relies heavily on the Haber-Bosch process, where large amount of natural gas is
required as feedstock and energy source. Hence, the dependence on natural gas,
for instance, cannot be over simplified. At present, only 75% of the required fertilizer
for German farming is provided via domestic industrial giants. Chief amongst
these are:
1. K+S Aktiengesellschaft: Being Germany’s largest producer of ammonia and urea-based nitrogen fertilizers located in Kassel, it is considered as global hegemon in potash, magnesium, and sulphur products
2. SKW Stickstoffwerke Piesteritz GmbH: Being the largest producer of ammonia and urea-based nitrogen fertilizers in Germany located in Wittenberg. It has a separate arm for producing de-fossilized "green" fertilizers
3. Compo
Expert GmbH: Located in Münster, this international company specializes
in high-quality specialty fertilizers and bio-stimulants for horticulture, turf
covering and other agriculture.
All three above and many others who are engaged in
domestic fertilizer production realize that the future for fossil-fuel based
fertilizer within Germany is bleak, due mainly to Energiewende policy mandated by the Federal Government
agencies tasked to bring out the “Green Transition” quickly.
Threats perceived
Heavy penalties would be imposed by these Federal
agencies on the recalcitrant factories who fail to transition to using
renewable energy source as well as green ammonia made on the basis of green
hydrogen, which is produced with electrolysis using renewable electricity. In
any case, generating renewable electricity is more expensive in Germany.
Options available
There are only two options available for the affected factories. Either liquidate the company or relocate elsewhere in Europe, say Spain.
Geoeconomics Risk
1. Right now sourcing fossil fuel and natural gas is wrought with high geoeconomics risk. Closure of Hormuz Strait and blocking of Red Sea Navigation adds more cost in terms of transport and marine insurance not to forget about the high prices quoted for the fuel itself
2. Existing supply chain issues involving imports
of fertilizers such as potash, phosphate, and sulphur from Mid-East would be
further exacerbated when German fertilizer firms relocate their production
facilities elsewhere in Europe.
Strategy Advice
The Federal Government must re-examine the structure and deadlines
regarding Energiewende goals while the companies in fertilizer industry have to
shelve their plans for energy transmission and relocate outside of Germany.
Navigating strategy amid geoeconomics recommend both governments and fertilizer companies to re-assess Energiewende ASAP.
Cheers!
Muthu Ashraff
Strategy Adviser
Mobile: + 94 777 265677
E-mail: cosmicgems@gmail.com
Blog: Strategy Adviser
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