Germany — Germany is preparing measures to encourage energy traders to hold more natural gas for the coming winter as unusually low storage levels raise concerns over supply security.
Economy Minister Katherina Reiche plans to use market-based incentives instead of direct government purchases of gas, according to a government source cited by Reuters.
Under the proposal, Germany would expand the amount of gas secured through an autumn tender for Long Term Options, known as LTOs. The additional volume has not yet been decided.
LTOs allow Trading Hub Europe, Germany’s nationwide gas market coordinator, to arrange future deliveries from traders that can be called upon when supplies are needed.
The government has also agreed with state-owned energy companies Uniper and SEFE to make greater use of their available storage capacity, the source said.
The proposal comes as Germany approaches winter with gas reserves at unusually low levels. Storage facilities were about 53% full in early September, according to storage association INES.
That marked the lowest level recorded for that point in the year in 15 years, underscoring the challenge facing Europe’s largest economy as colder weather approaches.
INES warned the previous week that an exceptionally cold winter could lead to supply shortages as early as January.
Germany has placed particular emphasis on energy security since Russia’s invasion of Ukraine disrupted European energy markets and pushed countries across the region to reduce their dependence on Russian supplies.
The latest plan seeks to encourage private market participants to retain additional gas rather than requiring the German government to buy the fuel directly.
According to Politico, the government is expected to make a decision on the proposal by September 21.
Greater use of storage facilities by state-owned energy companies is also intended to provide additional flexibility during the winter. Stored gas purchased earlier can be held and then released when demand increases.
Uniper and SEFE are both major participants in Germany’s energy system. The government source said the two companies had agreed to use more of their storage capabilities.
SEFE said it would issue a statement shortly, while Uniper declined to comment.
The issue is being closely monitored because gas availability can influence electricity generation, industrial production and heating costs across Europe. Germany’s large manufacturing sector is particularly exposed to shifts in energy supplies and prices.
For policymakers, the challenge is to strengthen preparations for winter without introducing unnecessary government intervention into the gas market. Expanding the planned tender is an effort to use commercial incentives to increase available supplies.
The storage data from INES nevertheless highlights the limited margin for error should Germany face an unusually cold winter.
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