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Wednesday, June 29, 2022

Energy supply: Habeck: “From now on, gas is a scarce commodity in Germany”

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Natural gas is still available everywhere, albeit at much higher prices. But with a view to the winter, the federal government is extremely concerned.

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After the drastic reduction in gas supplies by Russia, the federal government declared the alarm level in the gas emergency plan. “From now on, gas is a scarce commodity in Germany,” said Economics Minister Robert Habeck.

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However, the security of supply is currently guaranteed. At least for the moment, gas consumers do not have to fear that their suppliers will terminate their supply contracts and demand higher prices. This would require a further step by the Federal Network Agency.

Habeck called for saving gas. “It will be a national effort. But we can overcome them in solidarity with each other – federal, state and local governments, citizens, companies, civil society.” Industry, government and private households should further reduce consumption. Among other things, Habeck called for heating systems to be serviced. This enables savings of 15 percent.

“Winter will come”

Even if gas is still being procured and stored on the market at the moment: “The situation is serious and winter will come,” said the Green politician. It was the omissions of the past decade “that have now led us into these difficulties”.

In his own words, Habeck assumes that prices will continue to rise. This will affect industrial production and become a major burden for many consumers. The government will relieve people with low incomes. “We won’t be able to absorb everything, but where every cent already has to be turned over twice and the fear of the next heating bill is avoided, we have to help.”

Second stage of the gas emergency plan

The emergency plan has three levels: The alarm level now declared is the second after the early warning level. The third would be the emergency level. According to the plan, the alert level indicates a disruption in gas supply or exceptionally high demand, leading to a significant deterioration in the supply situation. However, the market is still able to handle this disruption or demand.

The reason for the declaration of the alert level is the reduction in gas supplies from Russia and prices on the market. The German storage facilities are 58 percent full. “But if Russian gas supplies via the Nord Stream 1 pipeline remain at the low level of 40 percent, a storage level of 90 percent by December can hardly be achieved without additional measures,” the ministry said.

Despite the declaration of the alert level, utility companies have not yet been given the opportunity to increase their gas prices under the Energy Security Act. The mechanism also has a downside, said Habeck. So we are working on alternatives. If the regulation were activated, the suppliers could pass on their additional costs to their customers within a week. Old contracts would thus become obsolete, even with a price guarantee.

Reserve coal-fired power plants for electricity generation

The government wants to take several measures to prevent the gas crisis from worsening. Among other things, reserve coal-fired power plants are to replace electricity generation from gas-fired power plants. The corresponding law is to be passed by the Federal Council on July 8th. “It’s painful. Coal-fired power plants are simply poison for the climate. But we have to do it for a transitional period to save gas and get through the winter,” said Habeck.

A credit line of initially 15 billion euros will be made available for the further filling of the storage facilities. An auction model should make it more attractive for industrial consumers to save gas from the summer.

Habeck: Hopefully never gas rationing for industry

Rationing for industry should be avoided whenever possible. “That shouldn’t happen, in any month at best,” said Habeck, but added: “Of course I can’t rule it out because what we’re doing is so full of prerequisites. But it’s not a scenario we’re working towards – quite the opposite.”

Business associations expressed concern. The President of the Association of German Chambers of Industry and Commerce, Peter Adrian, said it was a good thing that the federal government was not currently allowing higher gas prices to be passed on to customers despite existing contracts. A fair balance between suppliers and customers must be achieved. The plans to reward gas savings in industry are correct.

The chemical industry, which according to its industry association VCI consumes 15 percent of the gas in Germany, also called for a fair distribution of the burden. According to a VCI press release, the reduction in gas supplies poses enormous challenges for society and industry. “It is important to develop a transparent process that distributes the unavoidable burdens as fairly and tolerably as possible to all gas consumers.”

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Source: Stern

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