Business

Germany must cut gas use by 20% to avoid winter rationing, says regulator

Warning of longer-term consequences for business in Europe’s largest economy

Germany must cut its gas use by a fifth to avoid a crippling gas shortage this winter, its top network regulator has said. Photograph: Stefan Sauer/dpa via AP

Sun Aug 14 2022 - 11:55

Germany must cut its gas use by a fifth to avoid a crippling gas shortage this winter, its top network regulator said, as businesses and households brace themselves for Europe’s biggest energy crisis in a generation.

Klaus Müller, head of the federal network agency (BNA), will be in charge of rationing gas supplies if Europe’s largest economy suffers a winter energy crunch. “If we fail to reach our target [of 20 per cent gas savings] then there is a serious risk that we will not have enough gas,” he told the Financial Times.

Mr Müller said Germany would also need about 10 gigawatts of extra gas supply from other sources to make up for the missing volumes from Russia – largely liquefied natural gas (LNG) from countries such as the US. That represents about 9 per cent of its current gas consumption. He said Germany will also have to rely on imports of gas from other European countries.

Mr Müller also warned that the longer-term cost of ending Germany’s dependence on Russia would be a “very high gas price” that could have big consequences for business. “Some production could move away from Germany because gas has become too expensive,” he said. “And that’s a difficult thing to happen.”

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Germany has feared a looming fuel crisis since Russia’s gas giant Gazprom throttled supplies through the Nord Stream 1 pipeline in mid-June, citing technical problems. The main conduit for delivery of Russian gas to Europe is operating at just 20 per cent capacity.

The decline in deliveries has pushed up gas prices, with the European benchmark rising from around €66 per megawatt hour at the start of the year to €206 (as of Friday afternoon). It has also played havoc with Germany’s attempts to fill its gas storage ahead of winter, when demand rises.

Germany has accused Russia of “weaponising” its energy exports as part of a backlash against sanctions imposed over Russian president Vladimir Putin’s war in Ukraine.

Over the weekend Germany’s economy ministry ordered all companies and local authorities to reduce the minimum room temperature in their workspaces to 19 degrees C over the winter.

Berlin has already reached the second stage of a three-part national gas emergency plan. If it reaches the final stage, which would entail the rationing of gas to industrial customers, the BNA would have to decide which companies could no longer be fully supplied.

Mr Müller admitted that being responsible for a decision that would affect thousands of businesses was taking its toll. “It’s like having the Alps on my shoulders. But it’s all about making the best of a bad situation.”

He said the BNA was doing “a lot of detective work” to establish which companies should be prioritised in any rationing.

“You need to try to figure out what effect cutting off the gas to certain companies will have on the supply chain for critical products, what the consequences will be for jobs, for production, for value chains,” he said. “If you take things like packaging and logistics, these are companies making containers for critical goods like medicine and food.” These, too, could be considered “systemically relevant”.

The same also applied to the glass and ceramics industries, he said.

Key to Germany’s preparedness this winter is the amount of gas it is able to put into storage. Tank operators are required by law to bring levels up to 75 per cent by September 1st, 85 per cent by October 1st and 95 per cent by November 1st. Mr Müller said the first target was achievable – levels are currently at 74.4 per cent – but the other two were “much more ambitious”.

Gazprom-owned Rehden, Germany’s largest gas storage facility, is still only 52.3 per cent full. With Rehden “we still have a long way to go to fill [it] up,” said Mr Müller.

He warned that even if all tanks are filled they will only have enough gas for about two and a half months if Russia halts supplies altogether – and only provided it is not an unusually cold winter. “We need enough for at least two winters, not just one. And it’s not a good option to empty gas storage at the expense of next year.”

Germany wants to wean itself off Russian gas by the summer of 2024, and ministers have scoured the globe to secure shipments of liquefied natural gas.

If it comes to a gas emergency in the winter, Germany’s government has made clear that private households will be protected from a cut-off of supply. But Mr Müller warned they still didn’t “have the right to consume huge amounts of gas”.

The authorities had, he acknowledged, no way of making residential consumers use less of the fuel. But “I think people will do what they did during the pandemic: they’ll stick to the rules, even when no one is actually enforcing them,” he said. – Copyright The Financial Times Limited 2022

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