Davos 2023: Germany's Scholz upbeat on energy, warns on deglobalisation

The annual World Economic Forum 2023 in Davos

BERLIN (Reuters) - Germany's energy supply for this winter is secure, Chancellor Olaf Scholz said on Wednesday, adding that the ability of Europe's largest economy to swiftly wean itself off Russian gas has shown how flexible and speedy it can be.

In an upbeat speech at the annual meeting of the World Economic Forum in Davos, Scholz highlighted efforts to get over the energy crisis unleashed by Russia's invasion of Ukraine, including the swift creation of liquid natural gas terminals.

These terminals will help replace Russian pipeline gas that used to account for half of Germany's gas imports. Critics say that Germany might not have faced a major energy crisis if it had taken such measures to diversify supply before the war.

"It shows: Germany can be flexible; we can be unbureaucratic; and we can be fast," Scholz said.

The chancellor highlighted how the crisis had sped up the transformation towards a green economy - the LNG terminals could, for example, eventually be used for hydrogen.

Scholz said he was aware additional gas resources needed to be found to ensure greater European demand for LNG did not drive up prices and therefore scarcity for poorer countries, without elaborating on how to go about that or whether Germany would be willing to invest in new gas projects.

"Of course, we must avoid new lock-ins, new path dependencies at all costs," he said, adding this could be done by making new project hydrogen-ready "from the very outset and by expanding renewables in parallel".

Germany was competitive before the Ukraine war when energy prices were already comparably high because its business model was mainly based on "highly specialized research-and-technology-intensive industrial products", not energy-intensive mass production, he said. As such, it remained competitive.

Scholz warned however against the danger of deglobalisation that hung like "a sword of Damocles" over the world. New geopolitical tensions have led to disruptions in trade that are particularly difficult for an export-driven economy like Germany's.

(Reporting by Sarah Marsh and Matthias Williams in Berlin; Editing by Alex Richardson)