GERMANY WANTS TO IMPOSE NEW MEASURES TO PREVENT GAS SCARCITY

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Problem: Russia has threatened to cut off German gas supply and Germany does not have enough stored gas or replacement sources lined up. Government, industry, and public all worry about the effects of the expected embargo as German domestic and industrial heating is largely generated by gas.

Policy: A new set of measures was announced in mid-June, aimed at decreasing demand and further filling up storage capacities. The government announced steps to ensure supply reliability, including ”the provision of a credit line of 15 billion euros in order to ensure that the gas storage tanks are filled.”

On July 5, the German cabinet also approved plans to quickly assist struggling energy companies in regards to the approaching Russian cut -off and scarcity of affordable gas.

Context: On April 30, the revised energy industry law (Energiewirtschaftsgesetz) went into force. If a gas storage is not filled by its user, the current user loses the capacity and the Trading Hub Europe (THE) steps in.

Robert Habeck, Federal Minister for Economy and Climate, is pushing through the mitigation measures announced in June, in case of a sudden supply stop by Russia, andalso urged  the implementation of energy savings efforts over the next few months.

The Federal Government bought and stored 950 million cubic meters in natural gas, just 56% of total storage capacity. But the construction of LNG terminals is being accelerated, in order to diversify the gas supply.

In detail:

  • To reduce gas usage in the generation of electricity, Germany will return to coal. The corresponding legislation is currently in parliamentary procedures.
  • A gas auctioning platform will be designed by the Trading Hub Europe (THE), the German Federal Grid Agency, and the Federal Ministry of Economy and Climate
  • The KfW (the German government’s development investment bank) will provide additional funding for the THE to buy and store gas. The THE will then fulfill its legitimate monopolist task of ensuring the usage of gas storage capacity in Germany.

Despite re-activating coal plants in the short term to manage the threat from Russia, the government still plans to meet its ambitious climate targets and a coal phase-out by 2030.

Timeline: On December 1, 2022, the government aims to have gas storage filled at 90%, either by a special call for tenders or the THE buys gas itself

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