Gas storage facilities are falling to a level of 36.88 percent, down from 53.71 percent at the beginning of the year (according to Gas Infrastructure Europe). We are not the only ones who have discussed this rapid emptying of the storage facilities over the last few days. Yesterday even the Handelsblatt headlined "Gas stocks fall below critical limit". Is politics to blame? Is it due to a kind of passivity, to inactivity in procurement??
Less and less gas in storage – federal government eyeing liquefied gas
The Focus mentioned it today. German Economics Minister Robert Habeck is increasingly relying on liquefied gas from overseas to make Germany less dependent on Russian gas. This might not go down well with the green party base. But first the geopolitics counts more? The German government now apparently wants to push ahead with the construction of two liquefied natural gas terminals in Germany – because there are none in this country at all. Robert Habeck said in the Bundestag last week that liquefied natural gas (LNG) would require an infrastructure to be in place. The two terminals that Germany had once considered – Brunsbuttel and Stade – could not yet be privately financed. This question will now be addressed vigorously. Where the LNG then comes from will also be market-driven, he says. One should buy where the LNG is cheapest, he said. As laudable as the idea may be in terms of future security of supply, it will be years before these terminals are even planned, let alone built!
But you can buy more liquefied gas via the numerous other LNG terminals in Europe and then have it transported to Germany? Could the federal government fast-track new directives or laws to force gas buyers to buy significantly more gas now, and for inflated purchase prices, the state pays the buyers a refund?? Corona shows what can be done in a short time in terms of regulation, if only the state wants it. For example, the U.S. and Israel got the BioNTech vaccine much earlier than most other countries because they were willing to pay much higher prices – just for reference. And should Nord Stream 2 be allowed so that Russia pumps more gas into the German Gazprom storage facilities?? Questions about questions, and of course it depends on the political point of view. Should/could, for example, a green economy minister pay subsidies to gas buyers to buy overpriced large quantities of gas from American gas frackers?
Robert Habeck is not to blame?
Is it wrong to blame Robert Habeck for the high gas price and the low filling level of the gas storage facilities?? After all, he has only been in office for a short time. That a real danger of the (short term) supply shortage threatens, seems somehow not yet to have arrived in Berlin, so I formulated it yesterday. In the big picture, they do seem to be taking up plans that are supposed to address energy security and independence from Russia – but those are plans that take years to complete. But what do you do in the short term? That was my focus yesterday, and it’s on my mind now as well. On the one hand, Robert Habeck has only been in office for a short time. On the other hand, the federal government is blocking Nord Stream 2, also and especially under the new federal government – this is a political measure that can be evaluated either way. But beyond that, is it to blame for tight gas inventories? As I said, emergency measures could be taken to try to bring more liquefied gas into the country quickly?
What would be possible? In order to find this out first hand, we have asked the Federal Ministry of Economics directly what measures can or will be taken in the short term to counteract an imminent shortage of gas supplies. In a statement to our editorial team, the German Federal Ministry of Economics and Technology says that they are monitoring the situation very closely. The Federal Government is doing what is necessary to ensure security of supply. It is necessary to improve the possibilities for the next winter and to increase the precautions. Minister Habeck has already said this several times, including at the press conference to present the annual economic report. Work on this has begun.
In addition, according to the ministry, the current legal situation is that we have a liberalized gas market. In the liberalized gas market, the traders must be asked about contracts. However, when considering storage facilities, it is important to remember that they are primarily needed to cover peak loads on cold winter days. There is no supply of the German market from the storages alone. Rather, they would supplement the current energy purchases from pipeline imports.
To further improve crisis management in the gas sector, the Federal Ministry of Economics and Technology has been working continuously and in close exchange with EU member states for several years on further measures, according to the statement. Within the framework of the European gas supply security regulation, the so-called Security of Supply Regulation of 2018, the Federal Ministry of Economics concludes bilateral solidarity agreements between neighboring EU member states, it said. So far, cooperations have already taken place with Denmark and Austria (more here).
In the case of gas, according to the ministry, there are also market area managers who would have to react. For example, these could tender so-called Long Term Options, which happens every fall, so is quite common. Responsible are here however the market area responsible persons. In the medium term, the path is clear. More renewable energy reduces dependence on fossil fuels and can also stabilize prices. At present, it is the fossil fuels and the high demand for fossil energies that are currently driving up prices worldwide and thus ultimately also leading to price increases for consumers. The further expansion of renewables is therefore the right answer to reducing dependence on imports and keeping energy prices stable in the medium term. So far the current statements from the Federal Ministry of Economics and Technology.
So there is no talk of emergency measures (whatever they might look like) at the federal level to replenish gas storage in the short term. In the short term, the responsibility for this lies with the private suppliers. But as I said – the Corona crisis has shown what the legislator can realize in a short time, if the political will for it is there. But can we hope in the short term for good weather (less gas consumption), lots of liquid gas from overseas, and thus still sufficient stocks until early spring when the big heating demand subsides?