Gas emergency plan: Habeck calls for alarm level

Status: 06/23/2022 11:13 a.m

Due to the tense situation on the gas markets, the federal government has declared the second escalation level in the gas emergency plan. Economics Minister Habeck called the step “necessary” due to the endangered supply situation.

Federal Minister of Economics Robert Habeck has declared the gas emergency plan on alert. “There is a disruption in the gas supply, so this step is necessary,” he said at a press conference. “We are in a gas crisis. Gas is a scarce commodity from now on. Prices are already high and we have to brace for further increases.”

Habeck appealed to all consumers – both in industry, in public institutions and in private households – to reduce gas consumption as much as possible. He spoke of a “deceptive security” in the summer. “But winter will come, so we have to take precautions now to be prepared for the winter.”

The alert level is the second of three escalation levels of the gas contingency plan unveiled after the Russian attack on Ukraine. According to the plan, the alert level indicates a gas supply disruption or exceptionally high demand for gas, leading to a significant deterioration in the gas supply situation. However, the market is still able to handle this disruption or demand. Unlike the early warning level that has been in effect since March 30, the alert level could have significant consequences for businesses and consumers.

Russia cuts gas supplies

Habeck justified the declaration of the alert level with, among other things, the Reducing gas supplies from Russia through the Baltic Sea pipeline Nord Stream 1. The gas market has been even tighter than before since the gas flow was curtailed last week. Another burden is foreseeable: an upcoming maintenance of the pipeline is planned from July 11th, it could take about ten days. In recent years, gas storage facilities have been used to compensate for the lower gas imports.

“The throttling of gas supplies is an economic attack on us,” said Habeck. Russian President Vladimir Putin’s strategy is to stoke uncertainty, drive up prices and divide. The top priority is now to fill the gas storage tanks. Alternative providers would be sought and renewable energies expanded. In addition, more gas must be saved. “We are required to reduce gas consumption now in order to be prepared for the winter,” said Habeck.

However, the declaration of the alert level is also a prerequisite for the implementation of the plans of the federal government, to bring more coal-fired power plants online in order to reduce gas consumption in the electricity sector. This is laid down in the replacement power plant availability law, which will pass the Bundesrat on July 8th and then – after being specified by Habeck’s ministerial decree – should take effect quickly.

Price adjustment clause should not be activated

Despite the declaration of the gas alert level, the Federal Network Agency will not yet activate the price adjustment clause that suppliers could use to pass on higher prices directly to their customers. “We want to continue to monitor the market,” said Habeck. The current supply situation will already ensure higher prices and become a major burden for many consumers.

The regulatory authority will therefore not yet determine the “considerable reduction in the total gas import quantities” required under the Energy Security Act. This determination must be published in the Federal Gazette. Only then are companies allowed to raise prices to a “reasonable level”.

The alert level does not yet bring state intervention in the gas market. Only with the emergency level as the last step of the escalation ladder would the Federal Network Agency allocate who would still get gas in a gas shortage situation. Private households are particularly protected and should be cared for for as long as possible. Other protected areas, such as hospitals or security forces, are also exempt from this management. The industry would then have to adjust to cuts. Habeck announced the early warning stage as the first stage of the plan at the end of March.

“Failures of the last decade”

He wanted to avoid rationing for industry if possible. “It shouldn’t happen, in any month at best,” said Habeck, but added: “Of course I can’t rule it out because what we’re doing is so full of prerequisites. But it’s not a scenario we’re working towards – on the contrary.” It is about making savings, switching to other energy sources and expanding the infrastructure “to avert this scenario”.

“It’s the failures of the last decade that have led us into these difficulties,” said Habeck. You would be in a different position if you had really made progress in energy efficiency and the expansion of renewable energies in recent years. Habeck hopes that the gas market will be relieved by a new auction platform on which large industrial customers can offer gas quantities that they do not need. This should take effect in the summer. According to the Federal Minister of Economics, German industry is very open to participating in the gas auction model.

In addition, Habeck asked private households to maintain heating systems. “It makes sense to adjust the heating sensibly,” said Habeck. This enables savings of 15 percent. He also announced that the federal government would be advising on further relief for low earners. It is “task for the next few weeks” to analyze that and create support there. The federal government will not be able to absorb everything: “Where every cent already has to be turned over twice and the fear of the next heating bill is avoided, we have to help.”

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