Analysis – Fearing Russian cuts, German industry braces for fuel rationing race Reuters – zimo news



© Reuters. Pipe models are seen in front of the German and Russian flag colors shown in this illustration taken on April 26, 2022. REUTERS/Dado Ruvic/Illustration


By: John O’Donnell and Christoph Steitz

FRANKFURT (Reuters) – Large German companies are working on a plan to use an auction system to help distribute available supply in case Russia cuts gas, although some fear it could penalize smaller firms.

Discussions of possible rationing have become urgent after Russia cut gas supplies to Bulgaria and Poland last month.

That has fueled fears that the same could happen to Germany, which is heavily reliant on Russian gas and is nearing a deadline this month under a ruble program demanded by Moscow to pay for the fuel.

More troubling, Finland’s national energy supplier Gassum said Russia could cut off gas supplies this week as Helsinki ends decades of neutrality by seeking to join the North Atlantic Treaty Organization, which Moscow opposes expansion.

An action plan developed by Germany’s Federal Energy Agency (BNetzA), which will be responsible for rationing in the event of a gas supply emergency, explores which companies should be prioritized.

“Depending on the severity of the shortage…it may be necessary…to reduce gas supplies to zero for some users,” he said this week.

If the agency determines a company is playing a “special role,” he said, regulators could delay gas cuts for the industry, although that remains to be clearly defined.

Klaus Mueller, president of BNetzA, said several criteria will be considered when determining industry gas rationing, including company size, industry relevance and potential economic damage.

German industry pays particular attention to energy-intensive factories, such as glass, steel, food or pharmaceutical manufacturing, and the chemical sector, which provide many of the foundations for industry.

Some in the industry say it will be difficult for regulators to develop a cohesive ration list because manufacturing supply chains are intertwined and knock-on effects are difficult to predict.

higher pain threshold

To contain the situation, a proposal by the Confederation of German Industry (BDI), which will be submitted to Germany’s cyber regulator in early June, supports the idea of ​​an auction-style system.

If companies cut gas consumption through temporary or long-term shutdowns, the state will compensate them and set aside more money for key industries, an industry source said on condition of anonymity.

Another source said the model would seek to allocate gas based on price. Details are still being worked out.

However, German SMEs, backed by the “mittelstand” pressure group BVMW, are appalled by the idea of ​​using the system to handle gas rationing.

“Auctioning gas rights is unfair,” said the group’s chief economist Hans-Jürgen Walz, who said such a system could lead to the failure of mid-sized companies.

“The pain threshold in such auctions is much higher for large financially sound companies than for small and medium-sized companies.»

Mueller, the head of the network regulator, said last week that a gas ration auction could make sense.

Germany already has such a system in place to try to wean the country off coal.

Utilities are bidding for compensation they will receive in exchange for closing coal plants.

Companies willing to accept minimum prices in exchange for closing are eligible for state aid, allowing large power plants with larger stakes to continue operating.

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