Industry warns govt proposal for gas reserves could undermine supply security

Gas storage operators and Germany's energy industry have warned that the economy and climate ministry's law proposal aimed at ensuring sufficient gas supply could instead undermine supply security. The law will force operators to "have the gas storages full in winter”, said economy and climate minister Robert Habeck, according to a report by energy and climate newsletter Tagesspiegel Background. The draft law provides for minimum fill levels at certain times of the year, and states that storage users can be deprived of booked capacities if they do not use them. Habeck said that he expected "everyone to act in accordance with the law" and expressed his suspicion that some storage users deliberately postpone filling storages to increase profits.

Gas storage operators rejected the law and argued it could decrease supply security instead of increasing it. "There is a risk that market players will use the gas storage facilities to a lesser extent against the backdrop of the law," said Sebastian Bleschke, director of the storage association INES. He warned customers would cancel booked storage capacities in order to comply with the obligation to maintain minimum levels and avoid the risk of capacity withdrawal. The storage association said the law was tailored too closely to Germany's largest natural gas storage system, which is owned by a subsidiary of Russian energy company Gazprom and remained almost empty for months during the winter. Bleschke said the proposal increased risks for all other storage operators with long-term contracts, adding it was precisely such contracts that secure gas storage investments in volatile market situations like these. In the current form, the draft law "is the opposite of investment security and shakes confidence”, he said.

The German energy industry association BDEW also said the withdrawal of booked capacities could easily become counterproductive. The lobby group said it would be better to target individual storage clients who don't act rationally and hoard capacities without using them. "On the positive side, the originally planned harsh intervention in the market by means of a strategic gas reserve analogous to oil has been abandoned."