Germany steps up measures to save gas as Russia slows supply to Europe

Germany steps up measures to save gas as Russia slows supply to Europe

BERLIN — Germany will restart coal-fired power plants and offer incentives for companies to reduce their consumption of natural gas, marking a new stage in the economic war between Europe and Russia.

Berlin unveiled the measures on Sunday after Russia cut gas supplies to Europe last week as it retaliated against European sanctions and military support for Ukraine.

These measures, which are part of a broader strategy initiated after the invasion of Ukraine, aim to reduce gas consumption and divert gas supplies to storage facilities to ensure that the country has sufficient reserves to spend the winter.

The gradual reduction in gas supplies from Russia has raised the specter of a potential fuel shortage if Europe enters winter with less than full stowed. It also raised prices, putting additional pressure on economies that are already struggling with high inflation and rising borrowing costs and facing the prospect of a recession.

Nord Stream, the main channel for transporting Russian fuel to Europe, reported a sharp drop in gas supplies.

“It’s obviously Putin’s strategy to shake us up, drive up prices and divide us. We will not allow this. We will defend ourselves with determination, precision and reflection,” said Robert Habeck, German Economy Minister.

A natural gas storage facility in Germany. The gradual reduction in supplies from Russia has raised the specter of a possible fuel shortage.


Photo:

David Hecker/Getty Images

Gazprom blamed the shortfall on missing turbine parts that were stuck in Canada due to sanctions. European officials and analysts dismissed the explanation.

Germany imports about 35% of its gas from Russia, up from 55% before the war, and uses most of it for heating and manufacturing, according to German government estimates. Last year, natural gas power generation accounted for about 15% of total public electricity in Germany, Habeck said, adding that gas’s share of power generation is likely to have fallen this year.

To accelerate the decline of gas in the energy mix, Mr Habeck outlined a number of measures the government was taking to reduce gas dependence and build up reserves for the coming winter.

In a U-turn for a leader of the environmentalist Green Party, which has campaigned to reduce the use of fossil fuels, Mr Habeck said the government would give utility companies the power to expand the use of power stations coal-fired electrics.

This would ensure that Germany has an alternative energy source, but would further set back the country’s efforts to reduce carbon emissions.

“It’s bittersweet,” Mr. Habeck said of the need to rely on coal. “But in this situation, you have to reduce gas consumption. Gas tanks should be full before winter. This has the highest priority.

Legislation regarding the use of coal is expected to be approved on July 8 in the Bundesrat, the upper house of parliament, Habeck said. The measure expires on March 31, 2024, by which time the government hopes to have created a sustainable alternative to Russian gas.

Mr Habeck also said the government would introduce an auction system which would incentivize industry to reduce consumption.

The government has not released any details on how the auction will work, but Mr Habeck said it would start this summer.

Mr Habeck said the new measures are aimed at diverting dwindling gas supplies from Russia to storage reservoirs for use over the winter. Germany aims to have its gas storage facilities 90% full by December. Currently, gas storage facilities in Germany are around 56% full, Habeck said.

These measures are in addition to various previously announced measures aimed at reducing Germany’s dependence on Russian gas. According to plans drafted earlier, the government could ration gas for industrial users if it ran out in winter.

Rising oil prices helped push the national average price of a gallon of gasoline to $5 for the first time, leading to increased inflationary pressure in the US economy. Photo illustration: Todd Johnson

The government has made arrangements to buy gas from non-Russian sources and is accelerating construction of a liquefied natural gas terminal in the North Sea near Wilhelmshaven.

Mr Habeck said two of the four special vessels planned to convert liquefied natural gas that can be injected into the German grid would become operational this winter, allowing the country to resupply itself with gas independently from Russia.

Write to William Boston at william.boston@wsj.com

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