What Does Germany's Switch to LNG Mean for Resilience?

Germany's rapid pivot from Russian pipeline gas to US liquefied natural gas has exposed critical vulnerabilities in the country's energy supply chain.

A new report from the Institute for Energy Economics and Financial Analysis (IEEFA) reveals that 92% of Germany's LNG imports now originate from a single source, the United States, raising fresh concerns about procurement concentration and logistics dependencies in Europe's largest economy.

The reconfiguration of Germany's gas supply chain began in earnest following Russia's 2022 invasion of Ukraine, when European nations imposed economic sanctions on Moscow.

This decision severed ties with the EU's single largest gas supplier, forcing Berlin to rapidly redesign its entire energy procurement infrastructure.

The government commissioned several floating storage and regasification terminals while negotiating long-term LNG supply contracts with US producers. However, the IEEFA findings suggest this hasty supply chain restructuring could have simply replaced one geographic dependency with another.

In 2018, Russia was supplying roughly 52% of Germany's total gas imports through established pipeline infrastructure. The shift to US LNG has required building entirely new logistics capabilities, with the import concentration rising from 82% in 2023 to 92% in 2024.

Infrastructure investment and utilisation gaps

Germany's LNG infrastructure expansion has required substantial capital deployment, yet utilisation rates suggest significant overcapacity in the supply chain. Parliament allocated €9.8bn (US$11.3bn) to support LNG infrastructure development between 2022 and 2038, while the European Commission approved a further €4.06bn (US$4.68bn) grant to cover operational losses incurred by state-owned Deutsche Energy Terminal across four floating units. That figure could rise to €4.96bn (US$5.72bn) if actual losses exceed projections.

Despite this infrastructure investment, Germany's LNG sendout rate, the measure of how much imported gas actually enters the distribution network, sat at just 36.3% in 2024, well below the EU average of 50.8%. This utilisation gap points to a potential mismatch between infrastructure procurement and actual demand.

Germany's overall gas consumption has fallen considerably since peaking in 2021, dropping 15% in 2022 and remaining broadly flat since. Yet according to the IEEFA report, if all government LNG contracts are fulfilled, Germany would be committed to importing 26.2 bcm of LNG in 2030, almost three times its 2025 import volumes.

The country is planning to expand total LNG import capacity to 56.1 billion cubic metres by 2028, raising questions about supply chain efficiency and the risk of stranded logistics assets.

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Heat pump deployment reduces import dependency

One element of Germany's energy transition appears to have successfully reduced supply chain vulnerabilities. The installation of more than one million residential heat pumps between 2022 and 2025 has decreased cumulative gas demand by around 40 terawatt-hours across that period.

According to the IEEFA, this domestic heating transition has avoided the need to import an additional 16% more LNG over three years, reducing procurement costs by approximately €1.3bn (US$1.5bn).

In 2025, sales of heat pumps exceeded gas boiler sales in Germany for the first time, with almost 300,000 units deployed across 12 months. The IEEFA report suggests that continued electrification of heating, combined with energy efficiency programmes and renewable expansion, could offer a more resilient approach to energy security than infrastructure dependent on imported fossil fuels and vulnerable international shipping routes.

Hydrogen infrastructure creates uncertainty

Germany's current power sector strategy relies heavily on hydrogen infrastructure development, with plans to construct 10 GW of hydrogen-ready gas-fired power plants. However, the IEEFA expresses scepticism about the supply chain viability of this approach, arguing that high production costs, infrastructure gaps and project execution risks could mean hydrogen power plays a smaller role than government forecasts assume.

Germany's Network Development Plan envisions hydrogen power capacity of between 17 and 28 GW by 2045, equivalent to roughly 87% of the country's current gas-fired capacity. Yet IEEFA modelling suggests that if Germany pursues renewable development, battery storage and cross-border grid interconnections, it could source as little as 5% of its electricity from natural gas and hydrogen combined by 2045.

The outlook for carbon capture and storage (CCS) technology also remains uncertain from a procurement perspective. Europe currently has no operational CCS projects attached to gas power plants and IEEFA estimates capture costs alone exceed €150 (US$173) per tonne of CO₂, roughly double the current EU Emissions Trading System price of €76 (US$88).

If Germany attempts to decarbonise its 10 GW portfolio using CCS, subsidy costs could rise into the hundreds of billions.

Major utilities including RWE, EnBW and Uniper together account for a substantial share of Germany's roughly 70 GW of gas and coal-fired capacity. All three have signed long-term LNG supply agreements extending 15 to 20 years, creating what the IEEFA characterises as a procurement mismatch.

Companies planning to decarbonise their gas fleets are simultaneously locking in supply commitments that assume those same assets remain heavily utilised well into the 2040s.

Ana Maria Jaller-Makarewicz, Lead Energy Analyst for IEEFA's Europe team, frames the challenge in stark terms. "The Middle East crisis is Germany's biggest wake-up call to electrify since Russia's 2022 invasion of Ukraine," she says.

"There is significant potential for Germany to accelerate heat pump deployment and curb its reliance on gas imports even further."