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Germany activates the first level of a gas emergency plan 'as a precaution'. What it means

Germany has activated the early warning level of a gas emergency plan in case Russia decides to interrupt its supply of gas. Authorities assure there is no shortage of gas supply.

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The German Federal Ministry of Economics and Climate Protection announced on March 30 the launch of the early warning level of the Emergency Plan for Gas, solely for "precautionary purposes at this point".

Minister Robert Habeck emphasized that the supply of gas for Germans is guaranteed and that there is currently no bottlenecks of supply.

With the early warning stage, a crisis team made up of federal authorities and all the energy suppliers will meet regularly to monitor and evaluate the energy grid.

This announcement comes as Russia has requested to be paid in rubles for its gas, and that the European Union is looking at ways to reduce its dependence of Russian energy that ultimately finances Russian economy and the war in Ukraine.

Russia accounted for almost 40% of the E.U.'s annual gas imports in 2021, and Germany is one of the most dependent countries of Russian gas in its energy mix.

In a joint declaration on March 28, G7 countries refused to pay Russian gas in rubles arguing a breach in the contract. On the other hand, Russia threatens to cut supply if it is not paid in rubles, a way for Vladimir Putin to support and limit devaluation of the currency as the country has become more isolated to financial markets because economic sanctions.

"We need to step up our preventive measures in order to be ready to cope with any escalation by Russia,” Minister Habeck said.

Monitoring and coordination of the domestic gas market

In the first stage of the gas emergency plan, gas suppliers are expected to regularly report the situation to the federal government. Electricity transmission system operators would also coordinate their measures to keep a stable energy supply to individuals. Gas traders, distributors may also have more flexibility on the procurement process, increase gas storage to improve energy security but the government will not intervene.

The Emergency Plan for Gas is based on an European Union regulation from 2017 concerning measures to safeguard the security of gas supply. It contains three levels of alert: the early warning level, the alert level and the emergency level.

The early warning level has been activated because "there is concrete, serious and reliable information that an event is likely to result in significant deterioration of the gas supply situation". This can also be activated when there is a long-lasting low storage level or temporary absence of gas flow at key physical entry points.

The second stage, the alert level, is not much different. It would provide further flexibility to energy industry players with more of a cross-sector coordination but energy will still answer to market rules.

The government would declare the emergency level by ordinance in case of a "permanent deterioration of the supply situation," if "large-scale supply disruptions can be expected over the long term" or when the market is basically not able to ensure a stable supply of gas anymore.

If the emergency plan is activated, the government then manages the supply of gas in the country. The Federal Network Agency, the agency of the Ministry for Economic Affairs that regulates energy and telecommunications markets, would become responsible for distributing it.

Households and facilities like hospitals or power plants are given priority for planning gas distribution in that case.

While the government assures its population there is no gas shortage in the near future, it however warns it cannot ensures there will not be further price increases.

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