Criteria regulate distribution
What if there really is no more gas coming from Russia?
By Thomas Steinman
03/26/2022, 1:16 p.m
In order to take precautions for a possible gas crisis, a team from the Federal Network Agency is working on plans for the worst-case scenario. In the energy sector, many had recently expected a possible emergency for the coming autumn at the earliest. But the escalation caused by Putin’s ruble demands has exacerbated the situation.
The Federal Network Agency has been preparing for weeks if natural gas is no longer supplied from Russia. According to energy managers, the scenario has become more likely with Putin’s announcement that gas deliveries will only be accepted in rubles. The basis for possible state intervention in the gas market in the event of a supply stop is the “Gas Emergency Plan for the Federal Republic of Germany”, a 37-page guide that was last updated in September 2019. The paper basically regulates how the state allocates the gas when there are supply bottlenecks.
In the event that not all contracts can be fulfilled and the shutdowns contractually agreed with consumers from industry as a buffer are not sufficient, gas-fired power plants, which are not absolutely necessary for the security of the power supply, are the first to be affected by rationing. If this intervention is not sufficient, it is the turn of consumers from industry who need gas for process heat or products. Only as a last resort can the gas be turned off for the so-called “protected end consumers” such as private households or social institutions such as hospitals. Only then can it get cold in apartments and houses.
However, the contingency plan is primarily designed for a scenario in which gas supplies are only cut off for a limited time or in certain regions. The plan is not designed for a bottleneck due to the complete failure of the most important supplier, which will last indefinitely and affect the entire country. For this reason, the Federal Network Agency is working intensively on defining specific criteria that will be used to decide the order in which certain sectors or companies will be shut down. The Bonn authority is also in close contact with large business associations and important energy-intensive companies.
Gas emergency not expected until next autumn at the earliest
In order to take precautions in the event of a possible serious gas crisis, the Federal Network Agency has brought together an internal team of 65 employees from various areas. First of all, among other things, reporting chains and telephone numbers of important players and bulk consumers were checked in order to know and be able to communicate with the contact persons in an emergency. In an emergency, it would then be the task of the regional distribution system operators to implement the so-called “sovereign allocation”.
It is therefore important that the federal government defines uniform and legally sound criteria according to which individual economic sectors and industries are prioritized. One of the central considerations is which sectors are systemically important in order to be able to maintain the most important areas of life. Since there has never been a situation like this in Germany, rationing is likely to lead to numerous lawsuits directed against the concrete implementation of the shutdowns.
In the energy sector, many had recently expected a possible gas emergency to be in the coming autumn at the earliest. The heating season is coming to an end, and there are still certain reserves available in German gas storage facilities. Many believed that this would get through the summer. But the escalation caused by Putin’s maneuvers on Wednesday has exacerbated the situation. A delivery stop is therefore already conceivable in the short term if the Europeans do not agree to Putin’s conditions in order not to undermine their own sanctions against the Russian central bank – and the Kremlin then stops the flow of gas to the West.
Crisis plan provides for three stages
On Thursday, the head of the energy industry association BDEW, Kerstin Andreae, called on the federal government to activate the early warning level of the gas emergency plan. “There are concrete and serious indications that we are coming to a deterioration in the gas supply situation,” said Andreae. After Putin’s announcement, an impact on gas supplies cannot be ruled out.
The crisis plan provides for a total of three levels: an early warning, an alarm and an emergency level. The early warning stage is primarily about preparing for a possible emergency situation – and also coordinating this with the other EU partners. Market interventions are not planned at this stage. The next higher alarm level takes effect as soon as there is actually a disruption in the gas supply. In the highest emergency level, which is provided for the case of a “significant disruption to the gas supply”, state intervention in the market is expressly permitted in order to ensure the supply of protected customers.
On Thursday, the Ministry of Economic Affairs did not see any need to trigger the early warning stage, as there was no supply shortage. “The situation must continue to be closely monitored,” said a spokeswoman for the dpa. In any case, a formal activation of the early warning stage would increase the pressure on the Federal Network Agency to quickly develop a concrete plan for possible shutdowns.
This article is first at capital published.