Germany’s wide ranging policy response to Russian invasion

Since last Thursday, there has been a wide ranging response from many countries & companies around the globe to the events in Ukraine. Few however have seen such drastic changes as Germany:

  • A proposed minimum gas storage level mandate
  • Support for two LNG import terminals
  • NordStream 2 off the table
  • Keeping coal-fired plants in reserve in the short term
  • Targeting 100% of energy from renewable sources by 2035 (compared to previous target of 2040, which already posed significant challenges)
  • Increase in defence spending to above the 2% of GDP NATO target.

In the chart, we focus upon the first bullet, the planned minimum mandatory gas storage levels. The grey bars reflect the minimum gas storage level required on the first of the month, with the trajectory in 2021 (light blue line) only clearing one of the targets across the year. The targets would be achieved via two steps (i) market based (ii) tendered storage options, with associated impact on summer injection demand and seasonal spread levels.