Low Gas Levels in Rehden Storage: The Network Agency's Assessment - What's Really Going On?
Storage Facility in Rehden Faces Gas Shortage – Insights from the Grid Authority - Scant Gas Reserves in Rehden According to Network Agency's Statement
Let's dive into the current predicament with Germany's natural gas storage facilities, focusing on the Rehden storage in the Lower Saxony town, which is alarmingly barely filled (just 2.21% as of the last check).
Although operators are sounding the alarm, the Federal Network Agency remains chill. In response to a query, the agency's big boss, Klaus Müller, affirmed that supply security is a certainty. With the North and Baltic coast terminals for liquefied natural gas (LNG), there are now more options than three years ago when Russian gas supplies got the axe.
Germany's storage levels as a whole vary day by day. The exception of one day, they've been steadily increasing since April 11, but the country is still lagging behind the European Union average, which hovers around 57%. The Rehden storage facility, which accounts for about one-fifth of the total storage capacity, hit rock-bottom levels of less than one percent three years ago, sparking major concerns in Germany and Europe about energy scarcity for businesses and homes.
The Federal Network Agency is keeping a close eye on Rehden. Typically, gas traders use storage facilities to buy cheap gas and profitably sell it at a later date, say during the winter when demand peaks. Regarding the dismally low fill level in Rehden, the agency mentioned in a statement that the booking by storage users is based on market considerations.
Recall the rule that most storage facilities must be 80% full by November 1? You might be wondering - will Rehden hit the 45% target? A spokeswoman for the agency stated that the target for an individual storage facility should not be considered in isolation. In the event of an interruption in individual pipelines, missing quantities could be compensated for through the use of cavern storage in the north and pore storage in the south until LNG deliveries arrive. Due to its geological properties, the stored gas in Rehden would only be accessible with a time delay, and any shortfalls could be better managed through the gas trade.
Germany principally relies on natural gas imports via pipelines from Norway, the Netherlands, and Belgium. As of Friday, roughly 13% of the total imported amount came through German LNG terminals. The operator of the Rehden storage facility, Sefe Storage, confirmed that the 45% storage target is still technically achievable – provided that the capacities can also be sold. The Association of German Gas Storage Operators (Ines) attributes the lower fill levels to a "certain restraint on the market," which makes it difficult to book and fill at current prices.
Interestingly, the industry association views the current storage targets as insufficient to guarantee supply security during winter. They argue that a nationwide average fill level of 70% across all storage facilities would be necessary to meet winter demand in Germany, even if storage facilities in other EU countries were maxed out. This suggests that the government may be passing the buck in terms of its responsibility for ensuring supply security during energy crises.
In essence, Germany's strategies for assuring gas supply, given the low levels in facilities like Rehden, revolve around several major approaches:
- Reducing Gas Demand and ConsumptionGermany, along with EU member states, is working to significantly cut gas consumption to lessen supply risks. By April 2024 to March 2025, member states are being urged to trim gas use by at least 15% compared to average consumption, taking pressure off storage and imports.
- Policy Measures on Gas Storage and Pricing
- The German government plans to abolish the gas storage levy starting in 2026, which was initially introduced to cover costs associated with filling storage sites amid high energy prices. This move aims to alleviate the financial burden on industries and consumers and indirectly boost storage refills and market stability.
- Additionally, Germany has approved the axing of the cross-border gas tax by 2025, paving the way for more efficient and cost-effective gas trading across European borders, thereby improving market integration and diversity among EU countries.
- Strengthening Gas Infrastructure and Supply Agreements
- Germany is focusing on natural gas as a bridging technology in its energy transition, planning to construct up to 20 GW of new gas-fired power capacity by 2030 to ensure grid stability and supply security as coal and nuclear phase out.
- Meanwhile, German energy companies are forging new LNG supply agreements, like the one with Woodside in the U.S., to diversify gas sources and reduce reliance on pipeline imports. However, it's worth noting that these projects are controversial due to inherent economic and geopolitical trade-offs.
- Strategic Storage and Market Mechanisms
- Although Germany currently does not plan to step in directly when legal targets for storage levels are missed, the gas storage levy account remains an essential market mechanism to support strategic storage. Future interventions, if deemed necessary, could be financed in a similar manner.
- The industry and finance sectors are collaborating to devise solutions for ensuring sustainable gas supply, as the low levels in facilities like Rehden calls for innovative strategies.
- In an effort to bolster industry support, financial aid could potentially be provided to incentivize gas storage operators to reach targets, promote efficient gas trading, and mitigate potential energy crises.
