Federal Minister of Economics Robert Habeck (Greens) has activated the alarm level in the gas emergency plan. He said this at a press conference in Berlin. “We have a disruption in the gas supply in Germany,” explained Habeck.

After consultation within the federal government, he declared the second of three shortage levels on Thursday morning. “From now on, gas will be a scarce commodity in Germany.” The gas storage facilities are above average and the gas supply is still stable at the moment.

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“The current situation must not give us a false sense of security,” said the minister. Since the throttling of Russian gas supplies via the Nord Stream 1 pipeline, the situation has become even more tense in order to get through the winter. “Gas is used as a weapon against Germany,” declared Habeck.

The alert level is the second of three escalation levels of the gas emergency plan. The relevant regulation was first activated after the Russian attack on Ukraine. Habeck had declared the early warning level on March 30th.

According to the plan, at the alert level now declared, there is a disruption in gas supply or an exceptionally high demand for gas, leading to a significant deterioration in the gas supply situation. However, the market is still able to handle this disruption or demand.

The announcement is related to the severe throttling of Russian gas supplies since last week. The Nord Stream 1 pipeline, through which Germany gets most of its gas from Russia, currently only has a capacity of 40 percent.

The alert level in the gas emergency plan means that the gas market, which is actually deregulated, can be observed even more closely by politicians. Only in the third and final stage, the so-called “emergency stage”, would the state actively intervene in the gas market.

The Federal Network Agency would then have to manage the massive gas bottleneck. The law stipulates that private households for heating and emergency infrastructure such as hospitals or fire brigades must be given priority.

With the alarm level now declared, the Ministry of Economics could already relieve the energy companies, which currently have to buy gas at expensive world market prices, but which they pass on to customers in business and private households at low prices due to long-term contracts.

An amendment to the Energy Security Act, which was passed in the Bundestag in May, gives energy suppliers the option of passing on prices directly in the event of an alarm – bypassing the current contracts. “But that’s not automatic and that’s why we won’t pull it today,” said Habeck.

“Private households can also make a contribution,” explained Habeck and advocated having the heating systems optimally adjusted before winter. These are seemingly trivial measures, but all in all they would have a great effect.

However, the declaration of the alarm level is also a prerequisite for the implementation of the federal government’s plans to bring more coal-fired power plants back on the grid in order to save natural gas in electricity production. The corresponding law is to pass the Federal Council on July 8th. Since the gas flow through the Baltic Sea pipeline Nord Stream 1 was throttled last week, the gas market has been even more tense than before.

Similar measures have been taken in Germany’s neighboring countries. The Netherlands are also planning to bring hard coal-fired power plants back onto the grid in order to reduce gas consumption in the electricity market.

In the past few days, German industry and consumer associations have been extremely concerned about the alarm level that has now been declared. The reason is that with this alarm level, a clause from the amended Energy Security Act could also take effect.

Paragraph 24 anchored therein provides that in the event of an alarm level, gas price increases can be passed on very quickly along the supply chain by the gas suppliers. Existing price guarantees would then no longer count – not even for consumers.

Stricter requirements apply to the paragraphs. The Federal Network Agency must also declare the alarm level. However, it is not certain that the paragraph will come as it is now in the law.

The Federal Network Agency must first have determined a “considerable reduction in the total gas import volumes to Germany”. This determination must be published in the Federal Gazette. Only then are companies allowed to raise prices to a “reasonable level”. Because of the alert level, there is no further price increase immediately.

Habeck also said on Thursday: “Prices are already high and we have to brace ourselves for further increases.” This will affect industrial production and become a major burden for many consumers.

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Apparently, the Ministry of Economics now wants to send a strong signal to save more energy. The Economics Minister sees the duty of industry, but also of private households. Habeck wants to create incentives for the economy to save energy. As in an auction, companies should be able to sell the gas they save.

However, trade associations expressed concern. The President of the Association of German Chambers of Industry and Commerce, Peter Adrian, said it was a good thing that the federal government was not currently allowing higher gas prices to be passed on to customers despite existing contracts. A fair balance between suppliers and customers must be achieved. The plans to reward gas savings in industry are correct.

The Federal Ministry of Economics has companies in mind when it comes to gas savings. Robert Habeck’s house wants to develop a special model whereby companies that save gas can sell the quantities to other companies. The gas auction model is scheduled to start in the summer.