Germany triggers ‘alert level’ of emergency gas plan, sees high risk of long-term supply shortages

Habeck previously warned that the situation was going to be “really tense in winter” without precautionary measures to avoid a gas supply shortage.

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Germany said it was moving to the “alert level” of its emergency gas plan, with reduced flows from Russia heightening fears of a winter supply shortage.

Economy Minister Robert Habeck announced on Thursday that Germany would move to the second stage of its three-step plan. It means Europe’s biggest economy now sees a high risk of long-term gas supply shortages.

Germany has seen a sharp drop in Russian gas supplies, prompting the country to warn that the situation will be “really tight in winter” without precautionary measures to avoid a supply shortage.

“We should have no illusions: cutting off the gas supply is an economic attack on us by [Russian President Vladimir] Putin,” Habeck said in a statement, according to a translation.

“We are defending ourselves against this. But it will be a rocky road that we, as a country, must now travel. Even if you do not really feel it yet: we are in a gas crisis”, he said. -he adds.

Habeck said gas has now become a scarce commodity and warned that an extraordinary rise in prices could persist. “It will affect industrial production and become a major burden for many consumers. It’s an external shock,” Habeck said.

According to Germany’s gas emergency plan, the alert level phase is triggered when there is a “disruption of gas supply or exceptionally high gas demand resulting in a significant deterioration of the gas situation. gas supply, but that the market is still able to manage that disruption or demand without the need for resorting to non-market-based measures.”

This phase does not call for state intervention measures. These come in the “emergency phase” of stage three, if the government deems market fundamentals no longer apply.

European policymakers are currently scrambling to fill underground storage with natural gas to provide households with enough fuel to keep lights on and homes warm before the cold weather returns.

The EU, which receives around 40% of its gas via Russian pipelines, is trying to rapidly reduce its dependence on Russian hydrocarbons in response to the months-long assault on the Kremlin in Ukraine.

Germany, highly dependent on Russian gas, previously sought to maintain strong energy ties with Moscow.

“The coal is on fire again”

Germany declared the first phase of its emergency gas plan at Mach 30, about a month after Russia’s invasion of Ukraine sparked an energy crisis in Europe.

The “early warning phase” acknowledged that although there has not yet been a disruption in supply, gas suppliers have been asked to advise the government as part of a crisis team. At the time, Habeck called on all gas consumers – from industry to households – to reduce their consumption as much as they could.

Along with Italy, Austria and the Netherlands, Germany has indicated that coal-fired power plants could be used to compensate for a disruption in Russian gas supplies.

Coal is the most carbon-intensive fossil fuel in terms of emissions and therefore the most important replacement target in the pivot to alternative energy sources.

Germany, Italy, Austria and the Netherlands have all indicated that coal-fired power plants could be used to compensate for a reduction in Russian gas supply.

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Habeck said last week that the government’s decision to limit the use of natural gas and burn more coal was a “bitter” decision, but the country must do everything possible to store as much gas as possible.

“Coal is on fire again,” Ole Hansen, head of commodities strategy at Saxo Bank, told CNBC’s “Squawk Box Europe” on Thursday. “Producers had been geared towards a lower demand future, but that’s obviously not what we’re seeing right now.”

Speaking ahead of Germany’s move into the alarm phase of its emergency gas plan, Hansen said the statement would reaffirm the difficult situation Europe finds itself in, with coal seen as a ” short-term solution” to replace the reduced flows of Russian gas.

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