Saving is rewarded with money
So Habeck wants to reduce gas consumption
By Max Borowski
6/20/2022, 4:52 p.m
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Russia is starting to turn off the gas supply to Europe. In order not to be blackmailed, Germany urgently needs to save gas. Among other things, companies should be paid for saving. Experts call for similar incentives for private consumers. An overview:
How much gas must be saved?
Most recently, Germany still got around 35 percent of its natural gas from Russia. Last year it was over 50 percent. The previous reduction in dependence on Russia is mainly due to additional deliveries of liquid gas from the USA, among others. According to plans by the federal government, Germany should be able to completely do without Russian gas by 2024. However, should Russia turn off the gas supply to Germany in the short term, this would probably have to be compensated for primarily by drastic savings in consumption. In order to build up as large a buffer as possible despite the already severely restricted deliveries from Russia and to be able to fill the gas storage facilities for the coming winter, the federal government now wants to curb gas consumption as much as possible. According to Energy Minister Robert Habeck, “every kilowatt hour” counts. Filling the memory is now “top priority”.
What measures did Habeck present last?
Electricity production from natural gas is to be replaced as far as possible by coal-fired power plants, some of which are currently being kept on stand-by or have been shut down. There should be a financial incentive for industrial companies to save gas. The state-owned KfW bank is to provide a credit line of 15 billion euros for the company Trading Hub Europe (THE), which is maintained by the long-distance gas network operators. Equipped with this liquidity, THE should continue to buy gas and push ahead with filling the storage facilities.
What is the potential of these measures?
Gas-fired power plants recently consumed a good 10 percent of natural gas in Germany. Gas-fired power plants cannot be completely replaced by coal-fired power plants. Industry’s share of gas consumption is much larger at over a third. However, the companies themselves only see little potential for savings. According to a survey, German industrial companies can only save about eight percent of their gas consumption in the short term, i.e. less than three percent of the total German consumption. Altogether, this is by far not enough to compensate for a possible complete failure of Russian deliveries. In order to increase savings in industry, the Federal Network Agency is to develop a special auction mechanism.
How do Gasspar auctions work?
The Federal Network Agency could advertise gas volumes to be saved. Companies then submit bids for how much money they are willing to forgo the amount of their usual gas. A company that can easily switch to another energy source or suffers relatively little financial damage from temporary production losses then demands correspondingly less compensation than an operator of a complex industrial plant that is absolutely dependent on gas. The lowest bids are then used in the auction until the specified amount of savings is reached. A comparable procedure has already been established in the electricity market to compensate for short-term fluctuations in the grid.
What about the private households?
Private households account for almost a third of gas consumption in Germany. Experts see considerable potential for savings here, even in the short term. Nevertheless, the federal government initially left it with appeals and the dissemination of savings tips. So far, Habeck has not ruled out that the legally stipulated minimum achievable temperature for rented apartments could be reduced. Some experts are calling for private consumers to be offered money to save energy, similar to companies. Veronika Grimm, economist and one of the “economic wise men” demanded that one should “urgently advertise premiums for households that drastically reduce their gas consumption in the coming winter”. You can check that relatively easily by comparing the gas bills, Grimm told the “Rheinische Post”. The potential is great, but you have to communicate early on that it’s worth it.
What about nuclear power plants and additional gas production using fracking?
The federal government rejects both calls for an extension of the service life of nuclear power plants and for approval of the controversial fracking in Germany. In doing so, she does not argue with environmental concerns, but with practical ones. It would be years before new sources of natural gas could feed gas into the grid, whether conventionally or with the help of fracking. Even the operators refuse to allow Germany’s nuclear power plants to run longer, partly because there is no fuel available for them.
What happens if all of this is not enough?
In the event that the measures decided so far are not enough, Habeck has already announced further steps without giving details. Should gas actually become scarce in the worst case, the Federal Network Agency would have to take over the distribution, according to Germany’s “Gas Emergency Plan”. Households and systemically important facilities such as hospitals or bakeries would then have priority over industrial companies.
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