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26th Jan 2023

Scholz says Germany ready to deal with winter gas curbs

  • German chancellor Olaf Scholz also urged the development of 'a large European electricity network, gas pipelines and, in the future, hydrogen' (Photo: German Finance Ministry)
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Germany is prepared to cope with possible gas curbs and energy shortages this winter, thanks to the government's timely measures, German chancellor Olaf Scholz said on Tuesday (30 August) — ahead of a two-day summit joined by Spanish prime minister Pedro Sánchez.

Germany's successful measures, Scholz said, include filling gas-storage facilities faster, building new liquefied natural gas terminals and reactivating oil and coal-fired power plants — while the decision on whether to restart nuclear power plants for the winter is still on the table.

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"We are now in a much better situation than was foreseeable several months ago as far as supply security is concerned," he said, pointing out that his country is more capable to face potential threats coming from Russia over cutting gas supplies.

His optimism, however, comes just hours before gas supplies via Nord Stream 1 (a pipeline connecting Russia and Europe under the Baltic Sea) will be suspended for three days. The unscheduled maintenance works, due to start on Wednesday, were announced earlier this month by Russian state-controlled energy giant Gazprom.

On Tuesday, Scholz noted that the Berlin government is expected to put forward a new package of measures "very soon" to help citizens and companies cope with skyrocketing energy prices.

Germany agreed in July to bail out Uniper with €15bn after it sounded the alarm over energy costs, but the firm requested an additional €4bn financial aid on Monday.

Soaring energy prices in recent weeks have prompted the German government to favour reforming the energy market, since electricity market prices "do not reflect the current situation," Scholz said.

Under the existing market rules, gas sets the overall electricity price, but some EU member states have long called for an overhaul of energy markets.

Spain, together with Belgium and Greece, has for months urged Brussels to set an EU-wide cap on energy prices and reform power markets to decouple gas and electricity costs — a proposal that is progressively gaining ground among other member states.

Vienna and Berlin both voiced support for reforming power markets this weekend.

Meanwhile, the European Commission said on Monday it is working on an "emergency intervention" plan to cope with surging energy prices. But it is unclear if the proposal will be ready for next Friday.

Spanish gas interconnection: France or Italy?

"Spain is willing to help the countries that are suffering the most from dependence on Russian gas and Putin's energy blackmail," Sánchez told reporters at the Meseberg Palace near Berlin on Tuesday.

But the geographical isolation of the Iberian peninsula from European networks of electricity and gas distribution makes it difficult for Spain to access the grids and export liquified natural gas (LNG) to its neighbours.

"We cannot use the LNG regasification capacity of Spain, which is 30 percent of all Europe, if we maintain the bottleneck," Sánchez said, reaffirming his interest in connecting the Spanish gas network with the rest of Europe.

Spain has currently six mainland LNG terminals for processing gas arriving by sea, but the interconnection with Europe remains low. The French and Iberian markets are interconnected thanks to two low-capacity pipelines.

France has for months been reluctant to build a pipeline through the Pyrenees (the so-called MidCat) after regulators of both countries rejected the costly infrastructure project in 2019.

But Sánchez's 'Plan B' is to build a more expensive submarine gas pipeline connecting Barcelona with Italy, to integrate Iberian resources into Europe's gas market if France holds back the MidCat project.

Scholz, for his part, said that increasing interconnection between Spain and Europe is a long-term solution to ensure the security of gas supplies in the EU since Spain and Portugal are capable of producing a surplus that should be exploited.

The German chancellor also called to scale up efforts to develop "a large European electricity network, gas pipelines and, in the future, of hydrogen." "We will do everything possible to achieve it".

EU plans 'emergency intervention' on electricity price

The EU is working on an "emergency intervention" plan to stem surging energy prices, which may require "structural reform of the electricity market" Commission president Ursula von der Leyen said.

Opinion

Does EU's post-Ukraine dash-for-gas square with green goals?

This winter's gas squeeze will pit affordable energy against longer-term climate and democracy policies. European leaders should not buckle to short-term energy fixes but maintain policy coherence that marries all three areas — or lose support both citizens and allies.

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