German state “de facto speculator” on gas markets in efforts to fill storages

The German state acted as a “de facto speculator” by supplying state funds and instructing Trading Hub Europe (THE) earlier this year to buy gas to fill the country’s storages quickly, because THE then"acted like an energy market amateur," energy economist Lion Hirth told Tagespiegel Background. THE is a subsidiary of the country's gas network operators and is responsible for the gas market in Germany. Parliament sources told Tagespiegel Background that THE bought about 50 terawatt hours (TWh) gas by early November, which amounts to about a fifth of Germany’s storage capacity. It spent 8.7 billion euros in total, which brings the average price per megawatt hour to 175 euros, writes Tagesspiegel. As this is a comparatively high price – large chunks were bought on the spot market – and the gas was not immediately resold on forward markets, THE now runs the risk of incurring heavy losses, depending on how gas prices develop.

Energy experts have criticised the behaviour of THE. That it acted solely on the spot market without hedging positions “can only be explained by a lack of technical and economic skills and this should have been remedied in such a long period of time”, analyst Hanns Koenig of Aurora Energy Research told Tagesspiegel. The government had introduced a law reform soon after the war against Ukraine broke out to ensure that Germany could fill its gas storages. Based on this law, THE has been procuring gas volumes since the beginning of June 2022 and storing them in the respective storage facilities. In September, it announced it would diversify its procurement approach and also use future markets.