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Germany's New Gas Storage Law - Erkin Sancarbaba

The current crisis atmosphere, which imposes governments to gravitate toward realist energy policies, requires taking necessary steps for the establishment of the legal infrastructure to protect energy supply security. In addition to the inability to diversify the energy suppliers and energy transmission routes to meet the energy needs, the lack of necessary measures to eliminate the effects of the crisis has caused many countries to be insufficient to meet the demand in the domestic markets. It seems that the European Union countries have started to make regulations, albeit a little late, considering the aforementioned deadlock. In Germany, where the size and consequences of the current energy crisis are being evaluated, legal arrangements have been accelerated to establish supply security in the energy market. Accordingly, the new gas storage law in Germany has been approved by the parliament and will enter into force on May 1. The new law, it is aimed to ensure sufficient gas storage before winter.

In line with the law, it is foreseen that the German government will monitor the gas sector, which was privatized in the past and has so far been able to use initiatives independent of state institutions in decision-making processes. By force of the new legal regulation, gas storage customers are required to store in line with the lower limits specified in the law. Within the scope of the regulation, which will be valid until April 1, 2025, it will be ensured that the gas storage facilities and underground caverns are 80% full by October 1, which is the beginning of the critical period for natural gas supply. The aforementioned required storage rate has been determined as 90% as of November 1 and 40% as of February 1.

The law aims to keep the storage rates high in order to reduce the effects of a potential energy supply security problem, especially in winter, and also to prevent speculation in gas prices in critical periods. In this direction, instructions, prohibitions, and fines have also been determined to ensure that the minimum storage levels determined within the scope of the law are reached.

It is possible to interpret the absence of any provision in the new energy storage law for the expropriation of strategic gas infrastructure and energy investments, as it aims to give confidence to the energy markets. However, on the other hand, the fact that the new law authorizes the government to intervene with the concern of energy supply security has brought along criticisms that the market-oriented approach in the energy sector in Germany has been abandoned. Another point of criticism is the provisions in the law that stipulate the adaptation of existing contracts to the new regime. It is considered that there are difficulties in adapting the existing contracts to the fundamental changes envisaged in the law.

It is known that the operation of natural gas storage facilities operated by Gazprom Germania was taken over by Germany's energy network regulator (Bundesnetzagentur) on the grounds that energy supply security should be fully ensured in the country. There are questions about how the aforementioned expropriation will contribute to Germany's energy security. It can be said that such decisions to be taken will cause insecurity in the energy market and will not go beyond deepening the dimensions of the current crisis.

It is important to understand the crisis that the German energy sector is trying to overcome to understand the measures taken by the law and the gains it aims for. The total gas storage capacity of Germany is equivalent to approximately 24 billion cubic meters and this amount corresponds to one-fourth of the country's annual domestic consumption. Last March, it was reported that the country's gas reserves were at the level of 25% compared to the total capacity.

Considering its timing, the law in question focuses on the reinforcement of reserves that are insufficient in terms of gas supply to Germany's domestic market. However, the legislation ignores the root of the main problem, which is that Germany's largest energy supplier is still Russia. In order to reveal the extent of the current inconsistency, it should be reminded that Germany frozethe Nord Stream 2 pipeline project. In addition, proposals to stop shipments from the active Nord Stream 1 pipeline started to take place on the agenda of the European Union. In line with these conditions, on the other hand, it is debatable whether it is sustainable to ensure a continuous natural gas purchase by obliging German companies to store large amounts of gas with legal regulations.

Whether the emphasis on LNG routes as an alternative to Russian gas has the potential to provide German consumers with relatively inexpensive gas should be thoroughly evaluated by German policymakers. None of Europe's LNG terminals is located in Germany, and even if European countries import LNG at maximum capacity in line with their existing terminals, they can meet about half of the Russian pipeline gas. In addition, another challenge for LNG to be an alternative to Russian gas is the inadequacy of infrastructural requirements, because, to gasify the LNG reaching Europe and deliver it from terminals to demand centers, significant capacity increase in existing pipelines as well as the construction of new interconnections between countries is required.

All in all, although there is a strong link between the implementation of existing legal regulations and the design of efficient and responsive energy policies, the success of legal regulations is strictly dependent on the consistency of energy strategies. The German gas storage law, which will come into force on May 1, is an example that is useful for policymakers to examine when determining the energy roadmaps of countries. When evaluated in terms of its content, the law, which contains extraordinary provisions that the German energy market is not accustomed to, reveals the dimensions of the energy crisis in Europe. Under the current conditions, it can be foreseen that the implementation of similar legal regulations in the other European countries is inevitable.


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