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Fear of stopping gas

Heidenheimer Zeitung |Igor Steinle|July 12, 2022
GermanyEuropeEnergy PolicyElectricity Prices

The Nord Stream 1 Baltic Sea pipeline has been out of service for maintenance since Monday. The date has been known for a long time, but there are still great fears that the natural gas pipeline will not be put back into operation in ten days as planned. Even before the revision, only 40 percent of the possible capacity flowed through the tube due to technical pretexts, which those involved believed were of a political nature. Now every scenario is conceivable: After the maintenance, the pipeline can be put back into full service - or the flow of gas completely stopped.


Energy supply: Nord Stream 1 is shut down for maintenance work. There's a good chance it won't flow again

The Nord Stream 1 Baltic Sea pipeline has been out of service for maintenance since Monday. The date has been known for a long time, but there are still great fears that the natural gas pipeline will not be put back into operation in ten days as planned. Even before the revision, only 40 percent of the possible capacity flowed through the tube due to technical pretexts, which those involved believed were of a political nature. Now every scenario is conceivable: After the maintenance, the pipeline can be put back into full service - or the flow of gas completely stopped.

How high will prices go then? This is speculation, Economics Minister Robert Habeck (Greens) has warned of a "price explosion" at some public utilities if the federal government allows large suppliers like Uniper to pass on the prices. Fear of bottlenecks has already pushed wholesale prices to a four-month high of EUR 175 per megawatt hour (Mwh). A year ago, the Mwh costs only 20 euros.

The wholesale prices for electricity for the coming year, which are closely linked to the gas price, provide a foretaste: they are more than 340 euros per kilowatt hour. In 2020, this value was still 30 euros. Admittedly, the end customer prices should not quite reach this level, says government advisor Andreas Loechel of this newspaper. "But that's not the all-clear, on the contrary," says the energy economist. The end of the price increases is "far from being reached".

Will there be a gas shortage in winter? Although it has been possible to reduce dependence on Russian gas since the invasion of Ukraine, from 55 percent previously to around 35 percent in May, the figure is probably even lower now. However, current calculations by the Federal Network Agency (BNetzA) show a gas shortage in three out of seven scenarios in winter. If no more gas flows through Nord Stream from now on, it could also be quite realistic that the country will get unscathed through this winter, but that the storage facilities will then run empty next spring, so that the problem would be postponed to winter 2023 .

An analysis by several German economic research institutes is more optimistic: They come to the conclusion that even if Nord Stream were to be stopped, even in the worst case scenario, there would be no gas bottlenecks this year and only in unfavorable scenarios next year. This is mainly due to the fact that the reservoirs have filled up well. Ultimately, the decisive factor for all calculations is how much additional liquefied natural gas (LNG) can be supplied via the Netherlands or the planned German LNG terminals and how much gas can be saved.

How are the savings to be made? The calculations of the BNetzA provide that 20 percent of the gas consumption must be saved. A large part of this is to be provided by pulling coal-fired power plants from the reserve to produce electricity instead of gas-fired power plants. In addition, the economy, which has already reduced its consumption by 14 percent since the beginning of the war, is to save even more: Gas that companies no longer need can be auctioned off at a state-organized permanent auction. Private consumers should provide the rest: This is how the Ministry of Economics promotes energy saving.

Will the LNG terminals still arrive in time? This is uncertain. In Wilhelmshaven, construction work to connect a chartered LNG ship has started, and it should be able to take LNG from December if possible. However, the industry association Zukunft Gas is skeptical and does not expect until February - the question is also with what capacity. This depends on whether the additional pipeline connection to the gas network will be completed in time. Another of a total of four ships is to be moored in Brunsbüttel near Hamburg, and according to the Ministry of Economic Affairs, the start of operations is targeted for early 2023.

What does this mean for consumers? Although private consumers are protected under EU law, they may not be turned off the gas. It could still be expensive, at the latest when the companies can pass on the price increases or when the billing for the coming year is due. In addition, consumers are not 100 percent protected against a heating failure. If there is a pressure drop in the network due to a lack of gas, in the worst case scenario the heating in tens of thousands of households will switch off at the same time. A technician would have to go to each house to restart the thermal baths, which could take several days to weeks."Since nobody can say exactly how dramatic the development will be, consideration should also be given to providing heat islands or warm rooms where older people in particular can stay even in a very cold winter,"

What is the threat to the economy? Economics Minister Habeck has already indicated several times that if there is not enough gas for everyone, the government wants to let market signals prevail for as long as possible before intervening itself: it is counting on companies to stop production on their own if prices rise. Only in the very last step would the BNetzA ration and decide who would still receive gas and who wouldn't.

What if Putin turns off the gas?

There would probably still be a recession in Germany. The chambers of industry and commerce, for example, are warning of a double-digit decline in economic output in the winter months. The chemical industry, which is the largest gas consumer at 15 percent, would be particularly affected. They need the gas not only as a source of energy but also as a raw material, for example for plastics, medicines or fertilizers. “The gas bottlenecks will not have the same effect everywhere, but will have different effects depending on the region. The south and the east are particularly affected,” says Jörg Rothermel of this newspaper, energy expert at the Association of the Chemical Industry (VCI).

Federal rescue

Chaos already reigns in the energy industry. Gas importer Uniper is about to be rescued by the federal government worth billions. The group has to replace Russian gas at great expense, but has not yet been able to pass on the additional costs to customers. However, the company plays a central role in the German energy supply and supplies more than 100 municipal utilities. If it were to file for bankruptcy, there would be a chain reaction through the energy sector. The government wants to prevent that. However, it is still unclear whether the company can pass on the additional costs to its customers or whether it will receive more money via a pay-as-you-go system.


Source:https://www.hz.de/politik/ang…

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