German Gas Operator Warns of Regional Shortages in Winter

Germany could face regional gas shortages in winter as gas supplies from Russia to Europe's largest economy have been heavily reduced, according to the country's gas market operator. Although a gas shortage at a national level was not expected, not all gas storage facilities could be filled, leading to local bottlenecks.

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"Unfortunately, that cannot be ruled out," Trading Hub Europe (THE) Director Torsten Frank said, adding that German citizens would not be affected as the country was making "good progress" towards its overall goal of 95 percent gas storage by November.

Gas storage facilities are currently filled 80 percent, according to latest data by the Federal Network Agency (BNetzA). Some facilities are still lagging behind the target. The country's largest storage in Rehden, for example, is only at 61 percent of capacity.

At the end of July, gas supplies from Russia to Germany via the Nord Stream 1 pipeline were further reduced to 20 percent. After a routine maintenance of a turbine, the piece has not been returned over paperwork issues and remains at a Siemens plant to date.

Gas prices in Europe meanwhile are almost three times as high as before the start of the Russia-Ukraine conflict. European Title Transfer Facility gas futures were trading at around 270 euros per megawatt hour on Tuesday.

From October until early 2024, utilities will be able to pass on high gas prices to German consumers via a special gas levy. To counter additional burden, the government announced to lower the value-added tax (VAT) on gas from 19 percent to 7 percent for the same period.

"With this step, we are providing much greater relief for gas customers overall than the additional burden resulting from the surcharges," Chancellor Olaf Scholz said last week.

"Reducing the value-added tax is better than no relief at all. But it is not a good instrument, because it is expensive, not targeted and provides far too little relief for people with low incomes," said Marcel Fratzscher, president of the German Institute for Economic Research (DIW Berlin). 

Scholz promised further state support in the coming weeks to "ease the great pressure that is weighing on many citizens, as well as businesses." Previously, Germany had already set up inflation relief packages totaling 30 billion euros.