Germany triggers alert phase of emergency gas plan as Russian flows drop

© Reuters. FILE PHOTO: Pipelines at the Nord Stream 1 natural gas pipeline landing facility in Lubming, Germany, March 8, 2022.REUTERS/Hannibal Hanschke // FILE PHOTO

Holger Hansen

BERLIN (Reuters) – Germany triggered the “alert phase” of its emergency gas plan on Thursday in response to falling supplies from Russia, but did not allow utilities to pass soaring energy costs on to customers in Europe’s largest economy.

The measure is the latest escalation in the standoff between Europe and Moscow since Russia’s invasion of Ukraine, which has exposed the EU’s reliance on Russian gas supplies and sparked a frantic search for alternative energy sources.

The decision, announced by Germany’s economy minister, marks a clear shift, especially for Europe’s largest economy, which has energy ties with Moscow dating back to the Cold War.

When the government identified a high risk of chronic gas shortages, the government launched the “alert phase”, the second phase of a three-phase contingency plan, theoretically allowing utilities to pass the high prices on to industry and households, thereby helping to reduce demand.

For this reason, gas buyers and utilities in Germany have been pushing for the second phase, industry sources said.

Faced with reduced gas flows from key supplier Russia, Germany has been in the first phase of its contingency plan since late March, which includes tighter monitoring of daily flows and a focus on filling gas storage facilities.

Moving to the next stage has been the subject of speculation since Russian supplier Gazprom (MCX:) last week cut traffic through the Nord Stream 1 pipeline to just 40% of capacity, blaming the return of service equipment due to sanctions Delay.

In the second phase, the market was still able to absorb the missing volume without the need for state intervention that was activated in the final emergency phase.

Several European countries have outlined a series of measures to fend off a supply crisis to address concerns about winter energy shortages and soaring inflation that could test Europe’s resolve to maintain sanctions on Russia.

It has also prompted Germans to consider painfully cutting production and resorting to polluting forms of energy previously considered unthinkable as they adjust to the prospect of running out of Russian gas.

European benchmark Dutch front-month natural gas futures were up 4 percent at 131.50 euros per megawatt-hour (MWh) in early trade.

The European Union on Wednesday accused Russia of “rogue moves” in cutting natural gas and said it would temporarily turn to coal to fill energy shortages. Russia denies that gas supply cuts were premeditated.

Gazprom said last week it was cutting off flow through Nord Stream 1, in what could turn into a diplomatic conundrum around a turbine being sent to Canada for repairs.

A giant Siemens Energy gas turbine made in Canada for Nord Stream was sent back there for maintenance. Canadian officials have raised concerns about breaches of sanctions on Moscow that have prevented Siemens from getting parts of the pipeline.

Canada’s Natural Resources Minister Jonathan Wilkinson told Reuters that the Group of Seven nations could discuss the fate of the turbines at a meeting that begins on Sunday, citing German concerns over natural gas supplies.

“I believe it’s going to be in the hallways of G7 at least,” he said. “I’m not holding my breath, we’ll find a solution before it’s over.”

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