In order to ensure gas supplies for next winter, the Germans will have to make “painful” savings
Faced with low volumes of gas supplied by Russia, the German government will use more coal in the summer, compensate the industry not to use gas and grant billions of euros in loans to traders for the purchase of gas.
Few countries are as dependent on Russian gas as Germany. The EU’s biggest net importer of gas from Russia has been rocked by repeated supply cuts, with Russia’s state gas company Gazprom citing technical problems stemming from the sanctions. Flows through the key Nord Stream 1 pipeline were down to just 40% of their usual level as of June 16.
” The situation is serious. We are therefore further strengthening precautionary measures and taking additional measures to reduce gas consumption.”Robert Habeck, the country’s Minister of Economy and Climate Action, said in a written statement on Sunday (June 19).
“Gas consumption must continue to fall, but more gas must be put into the storage facilities, otherwise it will be really tight during the winter. We will now take the necessary measures.”he continued.
Mr Habeck introduces a new set of measures aimed at reducing demand from industry and the power generation sector as well as providing gas traders with state loans to enable them to buy more gas .
Coal power plants are ready
Reducing gas use in power generation was initially considered as part of an initiative to ensure energy security in May, with around 10 gigawatts of capacity available.
The law is currently being considered by the German parliament and is expected to come into force in mid-July.
“With this law, we are setting up a gas reserve […] reserved. And I can already tell you: we will use this gas reserve […] as soon as the law comes into force”explained Mr. Habeck.
With gas producing more than six terawatt hours of electricity in April and similar figures expected in May, the German government hopes to be able to store more gas by switching to coal.
The government had already considered extending the operating life of its last nuclear reactors beyond their initial closing date, December 31, 2021, before deciding against it. However, Mr Habeck had said in March that “Nuclear ‘wouldn’t help us'”.
From now on, additional coal-fired power plants will be in service for a transitional period. According to current plans, the gas replacement reserve will be kept until March 31, 2024. “It’s painful, but it’s an absolute necessity in this situation in order to reduce gas consumption”said the German minister.
Remunerate the industry
By summer, the German government will implement a gas auction model that will incentivize industrial consumers to reduce their gas consumption, similar to the systems already in place in the electricity markets . These measures are called “demand reduction programs”.
Businesses will receive a “remuneration based on the price of labour” for not consuming gas. “This creates an incentive to reduce consumption in industry, so that more is available for storage”underlined the minister.
This device already enjoys the support of German industry. “We particularly support the project to encourage the reduction of gas consumption in industry through calls for tenders”explained Karl Haeusgen, president of the mechanical industry association VDMA, on June 19.
Loans for traders
European Trading Hub (THE), a joint subsidiary of eleven gas transmission operators, which is in charge of the German gas markets, will be responsible for purchasing additional gas volumes.
To that end, it will receive a €15 billion loan from state-owned bank KfW, according to German public broadcaster tagesschau, to provide the cash needed to buy gas and increase the country’s gas storage levels.
The loan had already been approved by German Finance Minister Christian Lindner, while the parliamentary committee will be informed next week.
THE had previously been authorized to start storing gas at the low-level storage sites, including the largest in the country, located in Rehden and owned by Gazprom.
The measures proposed by Mr. Habeck were welcomed by the experts. “Very sensible what Habeck plans to save gas. This should have been done a long time ago”, wrote on Twitter Claudia Kemfert, professor of energy policy at the German Institute for Economic Research.
On the other hand, opinions expressed outside Germany were much more critical of this measure.
“German energy policy has reached the pinnacle of absurdity. It will reopen coal-fired power stations while closing nuclear power stations., said on Twitter Gérard Araud, former Ambassador of France to the United Nations and the United States.