German Economy Minister Philipp Roesler, also the German vice chancellor and leader of the junior coalition government member the Free Democratic Party, went to Russia on May 31 for a one-day visit. During his trip, Roesler was scheduled to meet with Russian Economic Development Minister Elvira Nabiullina and Minister of Trade and Industry Viktor Khristenko. Roesler's visit, his first international trip since becoming vice chancellor in early May, concentrated on talks over increasing Russian supplies of natural gas to Germany due to the German government's May 30 announcement that it would phase out nuclear power by 2022. Berlin’s decision to phase out nuclear power is a boon for natural gas-exporting Russia, especially with the first phase of the 55 billion cubic meter (bcm) Nord Stream pipeline coming online by the end of 2011 and second by the end of 2012. Germany’s easiest and cheapest alternative to nuclear energy will be increasing its dependency on Russian natural gas. However, there are several mitigating factors that will keep the German reliance on Russia a short- to medium-term scenario. Germany relied on nuclear power for 24 percent of its total electricity generation in 2010; coal accounted for 40 percent; renewable (wind power, solar power and hydropower) generated between 14 and 17 percent; natural gas generated 13 percent; oil 4 percent and other resources 6 percent. With nuclear power to be taken offline completely by 2022 and coal considered environmentally unpalatable — at least in terms of replacing the lost nuclear power production in the long term — the obvious alternatives are natural gas and renewable energy sources. To accomplish the phase out from nuclear power, Berlin has a two-part plan: reduce electricity use by 10 percent and more than double its reliance on renewable energy sources to 35 percent, all by 2020. This would more than make up for the loss of the 17 nuclear reactors to be taken offline. It is also a highly optimistic, expensive and long-term plan. (click here to enlarge) Germany's aging demographics should help with the first part of the plan to reduce electricity use. Currently, the largest population group in Germany is the most productive, the 35-55 year old range, a group that contributes greatly to overall economic productivity and output. However, part of this cohort will begin to retire within a decade, forcing Germany to choose between allowing skilled migrants into the country for the manufacturing sector or outsourcing production to facilities in Eastern Europe. It is highly likely that Berlin will opt primarily for the latter, which would decrease the industrial electricity demand in the country. The second part of its electricity reduction plan to increase its reliance on renewable sources of energy from 17 percent to about 35 percent by 2020 is highly optimistic. Of the different fuel types, renewable energy sources for electricity generation are by far the costliest per kilowatt-hour. In fact, electricity generated by nuclear power is by far the cheapest of the alternatives, with wind power being more than three times and solar more than 20 times more expensive. The costs associated with renewable energy sources could be mitigated over time as technology advances, electricity transmission infrastructure is improved and as economies of scale develop. Furthermore, Germany has managed to bring up the share of renewable energy as a percent of total electricity generation relatively fast over the past decade but sustaining the same rate will be difficult. The biggest problem for renewable energy remains storing power and finding alternatives to it during days when it is cloudy or wind fails to blow, or both. The greater Germany's reliance on renewable power, the more complex this problem becomes specifically because of the lack of options for electricity storage. (click here to enlarge) As Germany deals with these issues, it will find it both essential and convenient to turn to Russia for more natural gas. Roesler and German Chancellor Angela Merkel have both stressed since the May 30 decision to phase out nuclear power that Berlin does not want to see a considerable increase in Russian natural gas imports. Over the next five to 10 years, however, it seems that Berlin has very few alternatives. Germany has no current plans to build liquefied natural gas facilities and shale natural gas production is not expected to come online in Europe for the next 10-15 years. Meanwhile, the Nord Stream natural gas pipeline has already begin pumping test quantities of natural gas and will be operational by the end of 2011, with the full 55 bcm capacity coming online by the end of 2012, which represents higher than 60 percent of current levels of German natural gas consumption. Natural gas currently only accounts for 13 percent of electricity generation, which is less than renewable sources combined. With such a low base, and with a significant source of supply coming online because of Nord Stream, natural gas is one source of electricity generation with considerable room to grow within the current decade, although that will also necessitate building more natural gas-burning power plants, something that the German government has shown it is keen on doing. If any country can set a complex industrial goal (increasing renewable energy resource reliance by about 20 percent in 10 years to replace the electricity generated by 17 nuclear reactors) and reach it in a short amount of time, it is Germany. German companies are already global leaders in both wind and solar power, and the country's industry is known for being by far the best at capital intensive, high-quality manufacturing. While Germany is becoming more efficient and is steadily increasing the percentage of electricity generated by renewable sources, it will have to rely on some fuel to replace nuclear reactors coming offline. That fuel will most likely come from Russia. The question is what will be the geopolitical implications of this trade relationship in the next 10 years.