Germany's gas crisis: A gloomy forecast

Germany l Gas | Nord Stream 1 | Inflation | Russia-Ukraine war


Current Situation

The Bundesnetzagentur (Federal Network Agency) has published a statement on 7 July, drawing attention to the following points:

  • The Federal Ministry for Economic Affairs and Climate Action (BMWK) has declared the alert level of the gas emergency plan. The Bundesnetzagentur is monitoring the situation very closely and is in constant contact with the companies in the gas industry.

  • The situation is tense and a worsening of the situation cannot be ruled out. The gas supply in Germany is, however, currently stable. At present, the security of supply in Germany continues to be safeguarded.

  • Overall, gas continues to be injected into storage. The storage facility in Wolfersberg (Bavaria) has been being filled since 27 June. Current storage levels at the storage facilities in Germany are 62.9%. The storage level at the Rehden facility is 23.7%.

  • Gas flows from the Nord Stream 1 pipeline are currently at about 40% of their maximum capacity. If Russian gas supplies via the Nord Stream 1 pipeline remain at this low level, it will hardly be possible to achieve a storage level of 90% by November without additional measures. The reduction is also affecting the transfer of gas to other European countries such as France, Austria and the Czech Republic.

  • The companies affected by the missing deliveries can currently procure these volumes elsewhere on the market at considerably higher prices. As a result of the supply reduction, wholesale prices have increased significantly and have recently remained at a high level.

  • Companies and private consumers must expect a considerable increase in gas prices. The Bundesnetzagentur expressly supports the call to save as much gas as possible.

Source: https://www.bundesnetzagentur.de/EN/Areas/Energy/Companies/SecurityOfSupply/GasSupply/start.html


Forecasts

Looking at the current storage levels, it becomes apparent that these are significantly lower when compared to historical levels.


History of storage levels (in %)

Blue line: current year

Grey area: historical range of storage levels from 2016 to 2021

Source: https://www.bundesnetzagentur.de/DE/Fachthemen/ElektrizitaetundGas/Versorgungssicherheit/aktuelle_gasversorgung/_downloads/07_Juli_2022/220707_gaslage.pdf?__blob=publicationFile&v=2


A number of forecasted scenarios can be found in a presentation by the Bundesnetzagentur dated 06.21.2022. In six out of seven of the scenarios calculated by the Bundesnetzagentur, the gas storages are almost empty. There is even the threat of an imminent gas shortage in three scenarios. In the worst case, there could be a gas shortage of 107 TWh as early as mid-December.


Forecast of storage levels under different scenarios (in %)

Forecast of gas shortages under different scenarios

Source: https://www.bundesnetzagentur.de/DE/Fachthemen/ElektrizitaetundGas/Versorgungssicherheit/aktuelle_gasversorgung/HintergrundFAQ/Gas-Mengengeruest.pdf?__blob=publicationFile&v=3


The individual scenarios are defined as follows:

Nord Stream 1 at 40% throughout the year

Scenario 1.1

Reduction of exports

Target storage levels reached

Nord Stream 1 at 40% throughout the year

Scenario 1.2

No reduction of exports

Gas shortage from the beginning of February

Nord Stream 1 at 40% throughout the year

Scenario 1.2.1

No reduction of exports, reduction in consumption at 20%, 16 GW LNG

Storage levels extremely low at the end of the winter

Nord Stream 1 at 0% after maintenance

Scenario 2.1

Reduction of exports

Storage levels extremely low at the end of the winter

Nord Stream 1 at 0% after maintenance

Scenario 2.2

No reduction of exports

Gas shortage from mid-December

Nord Stream 1 at 0% after maintenance

Scenario 2.1.1

Reduction of exports, reduction in consumption at 20%, 16 GW LNG

Storage levels extremely low at the end of the winter

Nord Stream 1 at 0% after maintenance

Scenario 2.2.1

No reduction of exports, reduction in consumption at 20%, 16 GW LNG

Gas shortage from mid-January

Source: https://www.bundesnetzagentur.de/DE/Fachthemen/ElektrizitaetundGas/Versorgungssicherheit/aktuelle_gasversorgung/HintergrundFAQ/Gas-Mengengeruest.pdf?__blob=publicationFile&v=3


Germany will have to reduce its gas exports to Europe in order to prevent a gas shortage, even if 40% continues to flow via Nord Stream 1. But gas exports from Germany to neighboring countries cannot be reduced at will. In addition to domestic supply security, the necessary supply of neighboring countries in the form of exports must also be guaranteed. This is stipulated in EU Regulation according to which the European countries must act in solidarity in the event of supply bottlenecks. Whether the 20% consumption savings are a realistic assumption and whether the LNG gas terminals can be put into operation as planned is questionable as well. Therefore, a lot depends on Nord Stream 1. This is also reflected in Germany's emergency plan. Germany has a 3-stage emergency plan with the following levels:


1. early warning level

2. Alert level

3. Emergency level


Germany is currently in the second stage of its emergency plan. This stage has never been declared in Germany before. In the event of a complete stop of gas supplies from Russia, the Federal Ministry for Economic Affairs and Climate Action (BMWK) is considering announcing stage three. This would result in the following:

"In the event that the emergency level is declared, the Bundesnetzagentur becomes the national supply coordinator and takes on the statutory duty of distributing and allocating the scarce gas resources during the crisis. It does so in close coordination with gas network operators."

A press release from April shows that the Federal Network Agency has been preparing for such a possible scenario for quite some time. It was about a survey of German gas network operators with the following objective:

"The objective is to provide the Bundesnetzagentur with current data in the event of a significantly worse gas supply situation in Germany or EU Member States. In such a situation it would be the Bundesnetzagentur's task to coordinate gas consumption."

The President of the Bundesnetzagentur formulated it as follows:

"We are working intensely to prepare for a situation where the Bundesnetzagentur must order supply reductions for major gas consumers. At the same time we are doing everything to keep that situation from occurring"

At the latest on 21 July, when the maintenance work on Nord Stream 1 is completed, we will see what happens.


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Source

https://www.bundesnetzagentur.de/EN/Areas/Energy/Companies/SecurityOfSupply/GasSupply/start.html

https://www.bundesnetzagentur.de/SharedDocs/Pressemitteilungen/EN/2022/20220421_Datenerhebung.html?nn=404530

https://www.bundesnetzagentur.de/DE/Fachthemen/ElektrizitaetundGas/Versorgungssicherheit/aktuelle_gasversorgung/HintergrundFAQ/Gas-Mengengeruest.pdf?__blob=publicationFile&v=3

https://www.bundesnetzagentur.de/DE/Fachthemen/ElektrizitaetundGas/Versorgungssicherheit/aktuelle_gasversorgung/_downloads/07_Juli_2022/220707_gaslage.pdf?__blob=publicationFile&v=2

https://www.bundesnetzagentur.de/DE/Fachthemen/ElektrizitaetundGas/Versorgungssicherheit/aktuelle_gasversorgung/HintergrundFAQ/FAQ_Gas-Mengengeruest.pdf?__blob=publicationFile&v=2


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