German regulator prepares for potential energy allocation next winter

Germany’s energy infrastructure regulator and distribution network operators are preparing for potential energy allocations next winter in the event that Vladimir Putin shuts down more than half of the supply pipelines. the amount of natural gas consumed by Europe’s largest economy.

Major industry groups have received letters from network operators asking them to outline their energy needs in anticipation of a potential shortage, according to three people who viewed the request. Two industrial companies with plants in east and southeast Germany told the Financial Times that they had been warned by local suppliers that gas deliveries could be limited by the end of the year.

Meanwhile, the Federal Network Agency, which oversees Germany’s energy infrastructure, confirmed that it was holding talks with businesses to prepare for the “non-stop shutdown”. avoidable” if an energy supply shortage occurs.

Klaus Müller, the agency’s president, said the discussions were “about preparing for a case that we hope will never happen”.

Under German law, companies deemed essential to the country’s supply of basic goods and services will be given priority in the event of an emergency, along with households. As a result, many of Germany’s largest corporations will be forced to cut their consumption, most likely due to a production shutdown.

“While we have legislation in place, we haven’t put in place real criteria to decide which customers are not protected, i.e. industrial or commercial customers, that will be cut first. . . That worries the industry quite a bit,” said Christian Hampel, partner at BDO Legal who advises a number of companies contacted by network operators.

They are also then asking about “what happens to the broader gas supply system if you shut down a particular company,” added Hampel.

Business groups including the body representing Germany’s chemical and pharmaceutical industries met with the Federal Network Agency on Friday to discuss such procedures, according to people briefed on the notice. about negotiations.

The Food and Drug Administration warned policymakers attending the meeting that “most sectors – agriculture, food, automotive, cosmetics and hygiene, construction, pharmaceuticals or electronics” will be affected by forced production cuts in this sector. The chemical and pharmaceutical sector, which includes companies such as BASF and Bayer, uses 27% of Germany’s natural gas supply.

The preparations come as Germany’s ruling coalition tries to find alternative gas supplies for those from Russia.

Speaking after signing an agreement with Qatar to supply liquefied natural gas, Economy Minister Robert Habeck said that agreement would not solve the bottlenecks for next winter. He added that the order of priority for energy consumption would be decided “politically” in the event of a shortage.

Several German industrial groups have had to suspend production due to the soaring cost of energy and raw materials. The Lech steel plant in Bavaria, which uses the same amount of electricity as a city of 300,000, said this month it was forced to reduce shifts. Steelmaker Thyssenkrupp has warned of “economic uncertainty” that could disrupt its production.

In recent days, businesses that are not considered a priority for gas supply have petitioned the Federal Network Agency to highlight their relevance to the broader German economy, according to three people involved.

In a survey of 175 companies released last week, 70% of respondents called for a review of the regulations, taking into account the “systemic” relevance of industry groups at risk of decommissioning.

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