Germany's Economy Ministry Proposes Lower Gas Storage Requirements

The German Federal Ministry for Economic Affairs is set to propose a reduction in the mandatory filling levels for natural gas storage facilities, a response to the evolving gas supply situation. The proposed changes, outlined in a draft regulation, highlight significant improvements in the gas supply landscape due to various measures implemented since the energy crisis of 2022.

During the height of the energy crisis, which was exacerbated by geopolitical tensions and reliance on Russian gas, strict regulations were established to ensure that gas storage facilities were adequately filled. Currently, the law mandates that storage levels reach 80% by October 1 and 90% by November 1. However, the Ministry has indicated that a more flexible approach is now warranted.

The improvement in gas supply stability has been attributed to several factors, including increased liquefied natural gas (LNG) import capabilities through terminals located on the North and Baltic Seas, as well as enhanced pipeline imports from Norway. Despite these advancements, recent price trends are raising concerns about the economic viability of filling storage facilities. Specifically, the existence of a 'negative summer-winter price differential' implies that gas prices are higher in summer than in winter, discouraging market participants from stocking up during the warmer months.

The Ministry's draft proposes adjusting the filling target for gas storage facilities to 70% by November 1, aiming to alleviate the financial burden associated with stringent mandates and to encourage market-driven solutions for gas storage. This shift is intended to mitigate unnecessary costs imposed on consumers through the gas storage levy.

Reactions to the proposed changes have been mixed. The Association of Municipal Enterprises (VKU) welcomed the decision to relax the rigid filling requirements, arguing that regulatory costs tend to be passed on to consumers, effectively making natural gas more expensive for households and industries. Conversely, the Energy Storage Initiative, representing operators of gas and hydrogen storage facilities, expressed concerns that lowering the filling targets could lead to insufficient storage levels ahead of the upcoming winter seasons.

As discussions continue at the European Union level regarding the regulations governing gas storage filling requirements, the German Ministry's proposal reflects a significant shift in the approach to gas supply management in light of changing market dynamics.