Natural gas and electricity prices in Europe continued to rise to new highs as Germany entered the “alert” phase of its emergency plan in response to reduced Russian flows and liquefied natural gas (LNG) imports.
Germany’s Robert Habeck, minister for economic affairs and climate action, addressed the move Thursday, warning that impending gas shortages could impact the country’s industry and “shock” consumers.
“We defend ourselves against this,” Habeck said in a translated statement. “But it will be a rocky road that we as a country now have to walk. Even if you don’t really feel it yet, we are in a gas crisis.”
Energy analysts with Energi Danmark, on Thursday said the gas markets had a “quiet opening” before prices continued the week’s trend upward.
“The most important topic is still the concerns surrounding Russian gas flows to Europe, but lower supply from Europe has added to the upside recently,” the analysts wrote. At the Title Transfer Facility (TTF) gas hub, “front month prices are now at the highest level since early March.”
TTF Sharply Higher
Dutch front-month gas futures rose to a week-high of $144/MWh on the news, Bloomberg reported. TTF prices, the European benchmark, have climbed more than 50% since Russian flows to Germany were reduced.
German power prices also swung upward through the week, but were slightly down at the market open Thursday, according to Energi Danmark. Rystad Energy reported the German baseload day-ahead price has soared from an average of $186.20/MWh during the first 10 days of the month to $315.59 Thursday.
Rystad’s Carlos Torres Diaz, senior vice president, said Germany’s policy change to extend coal power generation and boost the share of renewables could reduce its gas consumption by 5 Bcm by the end of the year. However, “gas power will continue to be the price setter,” as evidenced by Germany’s soaring winter contract prices.
“This level is even above the cost of gas power generation proving that the power market is pricing in an additional risk,” Diaz wrote.
At the “alert phase,” Germany is taking accelerated actions to monitor consumption and secure storage levels. It had not activated conservation measures as of Thursday.
Germany’s gas plan calls for intervention at the “emergency phase” after the government determines that “large-scale supply disruptions can be expected over the long term and there is no adequate alternative supply option.”
Germany’s energy ministry has said it would attempt to restore gas storage to 90% by November from the current 58% level. European Union storage was at 55% Wednesday, about 17 TWh below the five-year average.
Australia, the Netherlands and Poland activated their warning levels during the week after Russia indicated flows through the Nord Stream 1 (NS1) pipeline would be reduced. The news quickly followed shocks to the international LNG market from an extended outage at the Freeport LNG terminal in Texas.
NS1 operator PJSC Gazprom, has said the reduced flows resulted from delayed maintenance on its critical infrastructure due to western sanctions. Rystad reported exports from Russia to Germany through NS1 as of Wednesday had dropped from a level of 167 million cubic meters/day (MMcm/d) at the end of May to 67 MMcm/d.
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