Economists have calculated that the probability of a supply shortfall in natural gas in the event of a Russian supply freeze is far lower than in April. But not all risks have been averted.

Germany’s gas storage facilities are now more than 60 percent full and, according to economists, reduce the risk of a supply gap in the event of a Russian delivery stop.

As the website of Europe’s gas infrastructure operator (GIE) revealed on Monday evening, the storage facilities were 60.26 percent full. According to calculations by leading economic researchers, the probability of a supply gap in the event of a stop in Russian deliveries has fallen significantly compared to April.

Despite the now significantly better filled storage facilities, not all risks for the gas supply to industry in the winter half-year have been banned, according to the simulation study by the economic research institutes IfW, Ifo, RWI and IWH. “It is therefore advisable to let the price signals reach consumers in a timely manner” – i.e. to increase prices so that less gas is consumed.

The aim is to fill the storage tanks at least 90 percent by the beginning of November. However, there is great concern that the Russian state-owned company Gazprom will not turn on the tap again after the planned maintenance of the Baltic gas pipeline Nord Stream between July 11 and 21 and will supply even less gas than before. Germany obtains a large part of its gas supplies via this pipeline. Such maintenance is actually common. Russia had recently reduced deliveries through the pipeline to 40 percent, citing delays in repairs as a result of the sanctions. The federal government considers this to be a pretext.

Alternatives to Russian deliveries

Gas storage compensates for fluctuations in consumption. But their importance is limited. Because even if they were completely filled, their quantities would not be sufficient for the entire heating period.

According to estimates by the President of the Federal Network Agency, Klaus Müller, the storage facilities would only last two and a half months in an average winter to cover demand even without Russian gas. Therefore, Germany is looking for other options, such as liquid gas deliveries via floating terminals.

The German gas industry is skeptical that two terminals on the German coast can go into operation by the end of the year. “So far we only know of a clear implementation perspective from one of these floating LNG terminals with Wilhelmshaven,” said the board of directors of the industry association Zukunft Gas, Timm Kehler, the “Bild”. “The planned stationary terminals still have no final investment decisions.” In order to enable an import volume of 13 billion cubic meters of natural gas via the terminals in the coming year, the pace must be set in building and expanding capacities.

According to the institute’s study, there is a 20 percent probability of a gas shortfall of at least 23.8 terawatt hours (TWh) in the coming year if deliveries are stopped immediately, and in the very unlikely worst case even of almost 160 TWh. The resulting loss of production in the gas-intensive industry and its customers would result in a loss of added value of around 46 billion euros and, in the worst case, 283 billion euros. This corresponds to 1.6 or 9.9 percent of economic output in 2021.

Less purchasing power for households

The macroeconomic losses are likely to be significantly greater, as the direct effects would be amplified, the economists write. In addition, households would lose purchasing power as a result of higher energy prices. The simulations give the all-clear for scenarios in which the Russian deliveries, which are currently reduced to 40 percent, are continued: “Then there is no threat of gas bottlenecks for the industry, even in the case of unfavorable constellations.”

According to a study by the economic research company Prognos for the Bavarian Business Association, if Russian gas supplies were stopped in the coming six months, Germany’s economic output would collapse by 12.7 percent. Germany would “slide into a deep recession,” said chief economist Michael Böhmer. Due to legal minimum quantities in storage and the supply of priority customers, not even half of the gas requirements of the industry would be covered.

Germany is particularly vulnerable

From the point of view of the Mannheim-based economic research institute ZEW, Germany’s energy supply is particularly vulnerable in an international comparison – both to rising prices and to supply bottlenecks. In the analysis, the ZEW comes to the conclusion that the Federal Republic of Germany, together with the Netherlands, will become a “high-price island” when it comes to electricity supply. In terms of susceptibility to missing deliveries, Germany is therefore particularly vulnerable, together with Italy.