It will be expensive for consumers: gas storage causes prices to rise

Created: 05/25/2022, 08:39

By: Matthew Schneider

Gas storage: Germany has been importing cheap gas from Russia for years.

It's paying off now.

© picture alliance/dpa/XinHua/Attila Volgyi

The German gas storage tanks are filled under high pressure to get through the winter.

Starting in autumn, consumers will probably pay the price in the form of a new surcharge.

Munich – German gas storage facilities are being filled at record speed and have already reached the 40 percent mark.

The reason for this is the Energy Storage Act, which has stipulated since the end of April that the storage facilities should be almost full by November 1st.

The traffic light government wants to be independent of Russian blackmail attempts.

However, consumers will feel the costs of storage in autumn: “Currently, around 83 euros per megawatt hour of natural gas are being asked for June (as of May 23, 2022).

As a result, prices remain stable at a very high level,” explains Detlef Fischer, General Manager of the Association of Bavarian Energy and Water Utilities (vbew).

Consumers will notice the next price increase in winter

“The dealers are currently paying for it.

If they market the gas in winter, i.e. sell it to the public utility company, they have to hope that the gas will then be more expensive than it was when it was stored in spring and summer.” If this is the case, consumers will notice it the next time the price increases .

If the gas is cheaper in winter, the dealers pay extra.

"The costs for storage also have to be borne," says Fischer.

"That's why the transmission system operators are ultimately responsible for ensuring that the gas storage tanks are 90 percent full by November," explains Detlef Fischer.

Operators can apportion costs for security of supply

The long-distance network operators procure the contingents on the open market - that costs money.

"According to the new paragraph 35e of the Energy Industry Act, they are allowed to pass on the costs for security of supply to the traders in the respective market area," explains Detlef Fischer.

Those who will not be stuck with the costs: "Consumers will then see this levy on their heating bills in the fall," says the energy industry expert.

How exactly the storage costs should be distributed is currently being negotiated between the Federal Network Agency and the gas traders, including whether existing customers would be affected.

The Federal Ministry of Economics is reluctant to comment: the gas storage procedure is still being clarified.

So far it looks as if the storage strategy will only make a small difference financially: while gas still costs around 92 euros on the exchanges in May, futures transactions will still be valued at just under 90 euros per megawatt hour until March next year.

Only after that – when the stores will be empty – will the prices drop significantly.

Gas price could more than double

This exacerbates the situation, especially for consumers without a contract: "While a gas price of six to eight cents/kWh was normal last year, if you sign a new contract now, it's between 15 and 20 cents/kWh.

Added to this is the base price.

With the surcharge, it would be even more,” explains Detlef Fischer.

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That's why Fischer rejects special conditions for the industry: "We've had the opportunity to experience this several times in the electricity sector.

And the consequence of this is that the other customers are allowed to pay for the discounts as well.”