Ensuring sufficient gas reserves in Germany with a supplier commitment rule

_ Yuri Kofner, economist, MIWI Institute for Market Integration and Economic Policy. Munich, February 4, 2022.

The managing director of the German Energy Storage Initiative (Ines), in which the operators of German gas storage facilities have joined forces, emphasized in the Handelsblatt newspaper on February 2, 2022 that the “gas storage level in Germany is historically low”. [1]

Russia is not to blame for the low storage level, which “according to the unanimous statement of all market participants meets its contractual delivery obligations”. [2] According to statements by the Russian President, this should remain the case even if the Ukraine crisis escalates further. The reason for the low filling level are the historically high gas prices, which meant that German gas importers did not want to buy gas in IV 2021 because it was very expensive at that time (up to 300 euros per MWh).

According to AGSI, gas storage facilities in Germany were only 36 percent full as of February 3, 2022. The filling level of the Bavarian gas storage facilities was partially even more critical: Bierwang (50 percent), Inzenham West (43 percent), Schmidhausen (31 percent), Wolfersberg (30 percent); Breitbrunn, the second-largest gas storage facility in Bavaria, was only 7 percent full. [3]

According to a report by the Federal Ministry of Economics (BMWi, 2015), a national storage level of 40 percent is required on February 1 of each year in order to cope with  only a seven-day extreme cold. This criterion is currently not met. In order to cope with 30 days of extreme cold, a filling of 50 percent would be necessary. In the event of a political conflict, a storage level of at least 60 percent is necessary to bridge a one-month gas supply failure. [4]

The Energy Industry Act (EnWG) and the BMWi’s “Gas Emergency Plan” explain how to proceed in the event of a critical gas shortage in Germany. This process can be divided into two main phases. The first stage envisages a “blue out”, i.e. a contractually regulated interruption of gas supply for “unprotected” corporate customers, who in return would receive financial compensation. The second stage will phase out gas supplies to gas-fired power plants, combined heat and power plants, household customers, and “essential social services” – from “unprotected customers” first to “protected customers” last. [5]

In order to ensure sufficient gas reserves in the storage facilities, the management of the gas storage facilities must be changed through regulatory intervention. In principle, there are two alternatives up for debate: firstly, a strategic gas reserve based on the model of the existing national Petroleum Stockpiling Act (1998). The financing of the oil stockpiling via the oil stockpiling association (EBV) of the BMWi is ensured by compulsory contributions from the companies that import petrol, diesel fuel, light heating oil or aviation fuel to Germany or produce them here. The contribution rates are a uniform 3.56 euros per tonne. [6]

Better than a state-run strategic gas reserve would be a supplier commitment rule (compliance) for the gas companies, whereby a certain gas storage level must be reached shortly before the start of the heating period in autumn of each year. The importers would thus be obliged to procure sufficient gas. This approach is more cost-effective, as private companies have a better understanding of how and when to buy the required minimum volume from the gas market. The Energy Storage Initiative (INES) also supports this second approach.

Possible price increases for end customers, which can occur as a result of the implementation of both approaches, could be counteracted by reducing the tax component in the gas price. According to the VBEW, “taxes and levies” make up 33 percent of the gas price for German households. [7]

Therefore, the federal government should introduce a supplier commitment rule for gas companies according to the proposal of the Energy Storage Initiative (INES), [8] to ensure sufficient minimum gas reserves in Germany.

Sources:

[1] Stratmann K. (2022). Gasvorräte unter der kritischen Grenze. Handelsblatt. URL: https://www.handelsblatt.com/politik/energieversorgungskrise-gasvorraete-unter-der-kritischen-grenze/28024788.html

[2] Stölzel T., Güßgen F. (2022). Wer ist wirklich Schuld an der Gaskrise? Ein Daten- und Faktencheck. WiWo. URL: https://www.wiwo.de/unternehmen/energie/energieknappheit-wer-ist-wirklich-schuld-an-der-gaskrise-ein-daten-und-faktencheck/28005328.html?utm_medium=social&social=facebook&Echobox=1643199588#utm_medium=Social&utm_source=Facebook

[3] AGSI (2022). URL: https://agsi.gie.eu/#/

[4] BMWi (2015). Möglichkeiten zur Verbesserung der Gasversorgungsicherheit und der Krisenvorsorge durch Regelungen der Speicher. URL: https://www.bmwi.de/Redaktion/DE/Publikationen/Studien/moeglichkeiten-zur-verbesserung-der-gasversorgungsicherheit-und-der-krisenvorsorge-durch-regelungen-der-speicher.html

[5] BMWi (2019). Notfallplan Gas für die Bundesrepublik Deutschland. URL: https://www.bmwi.de/Redaktion/DE/Downloads/M-O/notfallplan-gas-bundesrepublik-deutschland.html

[6] BMWi (2022). Ölkrisenvorsorge und -management. URL: https://www.bmwi.de/Redaktion/DE/Artikel/Energie/mineraloel-oelbevorratung-transport-oelreserven.html

[7] VBEW (2021). Zusammensetzung des Erdgaspreises für Haushalte 2021. URL: https://www.vbew.de/releases/current/web/securedl/sdl-eyJ0eXAiOiJKV1QiLCJhbGciOiJIUzI1NiJ9.eyJpYXQiOjE2NDM4ODQ0MjAsImV4cCI6MTY0Mzg5MTYyMCwidXNlciI6MCwiZ3JvdXBzIjpbMCwtMV0sImZpbGUiOiJmaWxlYWRtaW5cL0RhdGVuXC9kYXRlaV9hbmhhZW5nZVwvVl8xODUuMjBfVkJFVy1HcmFmaWtlblwvVl8xODUuNDBfRXJkZ2Fzd2lydHNjaGFmdFwvMjA2LTJfWnVzYW1tZW5zZXR6dW5nX0VyZGdhc3ByZWlzX0hhdXNoYWx0ZV8yMDIyLTAxLnBkZiIsInBhZ2UiOjIzMn0.9mwNMYzGP017N_AJDs7Lf0Q-WrcaM0HJ_KX1H2XIeAY/206-2_Zusammensetzung_Erdgaspreis_Haushalte_2022-01.pdf

[8] Initiative Energien Speichern (2022).  Lieferantenverpflichtung. WiWo. URL: https://www.wiwo.de/unternehmen/energie/fuellstaende-der-gasspeicher-historisch-tief-schuetzt-eine-gasreserve-vor-russlands-willkuer/27992424.html

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