Germany triggers alarm stage of emergency gas plan

Gas pipelines set against beautiful sunset (germany gas)
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Germany has triggered the “alarm stage” of its emergency gas plan on Thursday in response to falling Russian supplies but stopped short of allowing utilities to pass on soaring energy costs to customers in Europe’s largest economy, according to Reuters.

The measure is the latest escalation in a standoff between Europe and Moscow since the Russian invasion of Ukraine that has exposed the bloc’s dependence on Russian gas supplies and sparked a frantic search for alternative energy sources.

The step is a largely symbolic signal to companies and households but marks a major shift for Germany, which cultivated strong energy ties with Moscow stretching back to the Cold War.

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Lower gas flows sparked warnings this week that Germany could fall into recession if Russian supplies halted altogether. A survey on Thursday showed the economy losing momentum in the second quarter.

“We must not fool ourselves: The cut in gas supplies is an economic attack on us by (Russian President Vladimir) Putin,” Economy Minister Robert Habeck said.

Gas rationing would hopefully be avoided but cannot be ruled out, Habeck said.

“From now on, gas is a scarce commodity in Germany … We are therefore now obliged to reduce gas consumption, now already in summer.”

Russia has denied the supply cuts were deliberate, with state supplier Gazprom blaming a delay in the return of serviced equipment caused by Western sanctions. The Kremlin on Thursday said Russia “strictly fulfils all its obligations” to Europe.

Berlin will provide a 15 billion euro credit line to fill gas storage and launch a gas auction model this summer to encourage industrial users to save gas.

The second “alarm stage” of a three-stage emergency plan means authorities see a high risk of long-term supply shortages. It includes a clause allowing utilities to immediately pass on high prices to industry and households. 

Habeck said Germany was not at that point, but the clause might get triggered if the supply squeeze and price gains persisted, pushing power companies deeper into the red.

“If this minus becomes so big that the companies can’t bear it any more and they fall down, the whole market threatens to fall down at some point—so a Lehman Brothers effect in the energy system,” he said, referring to the US investment bank’s 2008 collapse that rippled through global financial markets.

Local utility association VKU asked the government to protect consumers with subsidies or risk utilities going bust because of low-income retail customers defaulting on payments.

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The President of the Federal Network Agency, Klaus Mueller, believed it was possible for consumer prices for gas to triple.

“If you extrapolate it, it depends a lot on how you heat, how your building is built, but it can triple the previous gas bill,” he told RTL/ntv broadcasters.

The move to Phase 2 had been anticipated since Gazprom cut flows via the Nord Stream 1 pipeline across the Baltic Sea to just 40 per cent of capacity last week.

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