Page 10 - bne magazine July 2022_20220704

10 I Companies & Markets bne July 2022
Russia has drastically reduced gas supplies to Europe. At the current injections rates Europe could squeak through to its 80% full tank target by October, but if Russia makes further cuts then a full-blown crisis is on the cards. / wiki
that could see the global energy markets collapse completely.
“If [energy company losses] gets so big that they can’t carry it anymore, the whole market is in danger of collapsing at some point,” Habeck said at a news conference in Berlin. “So, a Lehman effect in the energy system.”
The country has already managed to reduce the share of its natural gas supplied by Russia from 55% before the invasion to around 35%, but there are not many easy cuts left to make.
German Vice-Chancellor Robert Habeck has put the country on the second highest energy alert on June 10 and ordered coal-fired stations that were due to be shuttered back on standby, along with Austria and the Netherlands. Another 10 EU countries have issued “early warning” notices of an impending energy crisis, Frans Timmermans, the European Union’s climate chief, said in a speech to the European Parliament.
Germany’s gas emergency plan is based on the 2017 EU regulations with three escalation levels: warning, alert and emergency levels.
The early warning is triggered if there are “concrete, serious and reliable indications that an event may occur which is likely to lead to a significant deterioration of the gas supply situation and is likely to trigger the alarm or emergency stage.”
The alert stage kicks in when these dangers lead a government
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to actively prepare for a crisis and allows them to enact legislation that will pass soaring costs on to the consumer. In the emergency stage, the government intervenes in the market to divvy up limited supplies through rationing.
Habeck said he was holding off on price adjustments for now to see how the market reacts. “It will be a rocky road that we have to travel as a country,” he said. “Even if we don’t feel it yet, we are in a gas crisis.”
To buy more wiggle room Germany has also launched the “80mn together for energy change” plan (a reference to the size of Germany’s population) to encourage citizens to make energy savings to reduce demand. Industry is bracing for the possible introduction of energy rationing.
Habeck called for the “diversification” of suppliers of raw materials and energy to achieve “a bit of independence from the malign intentions of the world’s dictators.”
Germany has by far the largest storage tanks in the EU and doubles up as a gas hub for other member states. Currently its tanks are 58% full, but that is only enough to cover 2-3 cold months and not enough to get through the winter, according to the Federal Network Agency. Gazprom has cut supplies of gas to 40% of the average and at that rate Germany will be short of gas at the start of the heating season. The record for the lowest level of gas in storage as of October 1 was set last year when European tanks were 77.3% full and that fuelled
a major gas crisis that sent prices up 20-fold at their peak.