Business

Germany takes step closer to gas rationing

June 24, 2022 11:00 am

[Source: BBC News]

Germany has taken a step closer to gas rationing after a drop in supplies from Russia.

The country has triggered the “alarm” stage of an emergency gas plan to deal with shortages, Germany’s economy ministry said.

It is the latest part of a standoff between the European Union and Russia over its invasion of Ukraine.

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German economy minister Robert Habeck said Russia was using gas “as a weapon” in response to EU sanctions.

“We must not fool ourselves. The cut in gas supplies is an economic attack on us by [Russian President Vladimir] Putin,” Mr Habeck said, adding Germans would have to reduce consumption.

Mr Habeck said there would “hopefully never” be a need to ration gas for German industry, but he added: “Of course, I can’t rule it out.”

Germany has now moved to the second stage of its three-part emergency plan, which is triggered when there is a disruption or a very high demand for gas.

The government will provide €15bn (£13bn) of loans to try to fill gas storage facilities and will start auctioning gas to industry to encourage big businesses to use less.

Moving to stage two of the plan puts more pressure on suppliers and network operators to balance out disruption by taking measures such as finding alternative sources for gas.

However, the country stopped short of letting utilities pass on soaring costs to customers, although that is theoretically possible under stage two.

Gas firms already had to ensure supplies under the first stage of the emergency plan, while gas network operators were reporting to the Economy Ministry at least once a day, and electricity grid operators had to ensure grid stability.

State intervention would happen under the third stage when there is a significant disruption to supply that the market cannot cope with, meaning supplies are rationed.

In the third stage, supply to the industry would be restricted first, while households and critical institutions such as hospitals would continue to get available gas.

Twelve European Union countries have now been affected by cuts to gas supply from Russia, EU climate policy chief Frans Timmermans said on Thursday.

Russia cut flows through its Nord Stream 1 pipeline to 40% of capacity last week citing problems with equipment, affecting countries including Germany.

Nord Stream 1 is due to undergo maintenance from 11 to 21 July when flows will stop.