Germany steps up gas-saving measures as Russia slows supplies to Europe

BERLIN—Germany will restart coal-fired power plants and offer incentives for companies to curb natural gas use, marking a new step in the economic war between Europe and Russia.

Berlin unveiled the measures on Sunday after Russia halted gas supplies to Europe last week, claiming technical problems were caused by Western sanctions against Moscow over its attack on Ukraine.

The moves, part of a broader strategy launched after Moscow invaded Ukraine, aim to reduce gas consumption and redirect gas supplies to storage facilities to ensure the country has enough gas reserves to weather the winter survive.

Russia’s gradual cutback in gas supplies has raised the specter of a potential fuel shortage if Europe goes into the winter with less than full storage capacity. It has also pushed up prices, putting additional pressure on economies already grappling with high inflation, rising borrowing costs and the prospect of a recession.

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

“It’s obviously Putin’s strategy to unsettle us, drive up prices and divide us. We won’t allow that. We will defend ourselves resolutely, precisely and carefully,” said Federal Minister of Economics Robert Habeck.

An underground natural gas storage facility in Germany. Russia’s gradual cut in supplies has raised the specter of a possible fuel shortage.


Photo:

David Hecker/Getty Images

Gazprom has attributed the shortfall to missing turbine parts stuck in Canada due to sanctions. European officials and analysts dismissed the statement.

Germany imports about 35% of its gas from Russia, according to federal government estimates, up from 55% before the war, and uses most of it for heating and manufacturing. Last year, power generation from natural gas accounted for about 15% of all public electricity in Germany, Mr 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 power mix, Mr Habeck outlined a number of steps the government is taking to reduce gas dependency and build up stocks for the coming winter.

In a U-turn for a leader of the environmentally conscious Green Party, which has campaigned to reduce fossil fuel use, Mr Habeck said the government will authorize utilities to expand the use of coal-fired power plants.

This would ensure Germany has an alternative source of energy, but would further delay the country’s efforts to cut carbon emissions.

“That’s bitter,” said Mr. Habeck about the need to rely on coal. “But in this situation it is necessary to reduce gas consumption. The gas storage tanks must be full by winter. That has the highest priority.”

The Coal Utilization Act is expected to be passed in the Bundesrat on July 8th, said Habeck. 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 that would motivate industry to reduce consumption.

The government did not release details on how the auction would work, but Mr Habeck said it would start this summer.

He said the moves are aimed at diverting dwindling gas supplies from Russia to storage tanks to be used over the winter rather than being consumed now. Germany wants to have 90% of its gas storage tanks filled by December. Germany’s gas storage facilities are currently about 56% full, said Mr. Habeck.

A munitions depot in Russia caught fire after explosions on Ukraine’s border with Moldova raised fears the war could spread; a monument to Russian-Ukrainian friendship was demolished in Kyiv; Poland reacted to Russia stopping gas supplies. Credit: Konstantinos Tsakalidis/Bloomberg News

The new measures come on top of a series of previously announced steps aimed at reducing Germany’s dependence on Russian gas. According to plans drawn up earlier, the government could ration gas for industrial users should it run out of gas during the winter.

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

Mr Habeck said two of the four planned special vessels to convert liquefied natural gas that can be fed into Germany’s grid would become operational this winter, allowing the country to replenish gas supplies independently of Russia.

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

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Luke Plunkett

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