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Regulator warns Germany risks running out of gas next winter

Klaus Müller says industry and households will have to make more savings to avoid power crisis

A section of the Nord Stream 2 gas pipeline in Lubmin, Germany. The country will have no access to Russian gas next winter. Photograph: Laetitia Vancon/The New York Times

Thu Mar 23 2023 - 15:55

Berlin’s energy watchdog has warned that companies and households will need to cut gas use further if Germany is to avoid an energy crunch next winter.

Klaus Müller, head of the Federal Network Agency, said Germany’s power crisis “isn’t over” and much depended on whether next winter would be colder than the last.

“The danger of a gas shortage is still there,” he told the Financial Times. “It depends a lot on whether we continue to curb gas use and ensure diversified supplies into Germany. And there are risks.” These included China’s economic recovery, which was accelerating “more quickly than many predicted”, leading to a higher demand for gas that will have “consequences in terms of price”.

The winter of 2023-24 will also be the first Germany has experienced “without any Russian pipeline gas at all”, while the global supply of liquefied natural gas (LNG) “is not expected to increase significantly this year or next”.

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Müller’s comments echo those of Fatih Birol, head of the International Energy Agency, who warned last month that Europe had not yet won its energy war with Russia, despite a big drop in gas prices. “Being overconfident for next winter is risky,” Birol told the FT, adding that Europe could not afford to lose focus on conservation or developing renewable energy.

Germany has been one of the biggest casualties of the turmoil in European energy markets sparked by Russia’s war in Ukraine. Before the invasion 55 per cent of its gas came from Russia. Those supplies virtually disappeared in the months after the fighting erupted, triggering a rush for alternatives.

The decline in Russian pipeline imports pushed wholesale gas prices higher than €300 a megawatt hour last summer, from about €20/MWh before the war. That forced some of Germany’s energy-intensive companies to shut down production and prompted warnings of blackouts and gas rationing for industrial customers.

But Germany managed to reconfigure its energy system to deal with the crisis, which Müller described as a “singular achievement”. Berlin sourced new supplies of LNG from the Middle East and US, increased imports of pipeline gas from Norway, the Netherlands, Belgium and France, and built its first LNG import terminals on the northern coast. Germany’s gas tanks are now 64 per cent full, a much higher level than a year ago.

Companies and households also made drastic energy savings, with industry using 20 per cent less gas this winter. “They did it through fuel switching, through technical innovations they should be really proud of, and through cutting back on production, something that is of course very painful,” said Müller.

But he said he was convinced they could – and might have to – go even further. “I don’t know any businessman who wouldn’t be prepared to make even more savings to prevent a gas shortage next winter,” he said. “I think we can – and must – do more [to save gas].”

Much, he said, depended on the weather. “We were very lucky to have had a very mild winter in Europe [in 2022-23],” he said. “But you see what a serious impact the weather has, you see how much gas has to be burned to heat homes when it’s cold.”

The energy crisis has led to a big restructuring of the corporate landscape in Germany. The government nationalised gas importer Uniper, which haemorrhaged cash when Russian supplies stopped, and took over Gazprom Germania, the German unit of the Kremlin-controlled gas company, which has been renamed Securing Energy for Europe or SEFE.

It is also in talks to acquire the German subsidiary of Tennet, the state-owned Dutch electricity network operator. Müller said talks were continuing and that the German and Dutch governments were keen to reach an agreement. “That is to be welcomed because it will help us to speed up the buildout of the electricity network,” he said.

Some senior figures in the German energy industry have expressed misgivings about the state’s growing role in the sector and want the government to provide clarity about its long-term plans for its holdings in companies such as Uniper.

Markus Krebber, chief executive of utility RWE, said in a recent magazine interview that private companies were at a competitive disadvantage to state-owned participants in the sector.

Müller said there was little likelihood of the government exiting Uniper and SEFE any time soon. “Both companies’ business model was based on importing Russian pipeline gas and they are still in intensive care,” he said. “It’s still too early to discharge them.” – Copyright The Financial Times Limited 2023

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