German energy czar warns: Don't let guard down on gas supply

The temperature outside Klaus Mueller's office almost resembles spring, exactly the kind of mild weather that helped Germany get through the winter without Russian natural gas.

But Germany's chief utility regulator is not ready to sound the all clear on an energy crisis spawned by the war in Ukraine, even with natural gas reserves abundant and prices well down from their peak.

Too much could go wrong — especially if consumers and companies grow weary of the conservation habits they learned during a winter fraught with fear of rolling blackouts and rationing, Mueller, head of the Federal Network Agency, said in an interview Wednesday with The Associated Press at the agency's headquarters in Bonn, Germany.

Plus, there's next winter to think about.

Other risks, such as a pipeline accident or a sudden cold snap, could set back plans to keep natural gas storage as full as possible as Europe learns to live without the cheap Russian gas that fueled its economy for decades.

Mueller would only concede that he's “optimistic” this winter will end without a further gas crunch, especially after Germany cut gas use by 14% in 2022 through lowering thermostats, switching to other fuels or halting energy-intensive industrial production. Gas use fell 19% in the last six months across the whole 27-nation European Union.

“But at the same time, we're focused already on winter 2023-24, and we know that Germany, and large parts of Europe, will have to get through the next winter without Russian pipeline gas," he said. And “the risks are in plain sight.”

While he's thankful for warmer-than-usual winter weather that cut gas use for heating, “will next winter be so mild? No one can say," Mueller said.

“Second, we have to see if the industrial firms and private households are tired of the efforts related to conservation — or will they redouble their efforts based on experience thus far? We're pushing for the second to be the case,” he said.

Mueller says he hopes the public responds to an approach based on transparency — not exaggerating risk but not sugarcoating it either. Yet the experience with measures such as masking and social distancing during the COVID-19 pandemic show “that always being told what to do is not especially popular.”

Key for the months and years ahead is a push to use heat pumps instead of gas heating, still the case in roughly half of German homes. Above all, higher prices will force homeowners and businesses to adapt simply to lower their costs.

Gas prices have fallen to under 50 euros ($53) per megawatt hour — the lowest level in nearly a year and a half — from a record 350 euros per megawatt hour in August, according to FactSet. But they are still well above the 18 euros per megawatt hour in March 2021, just before Russia started massing troops on Ukraine's border.

Mueller said it will take six months to a year for lower prices to filter through to less expensive utility bills for consumers. Asked whether prices two or three times their pre-crisis level are the “new normal," Mueller avoided the phrase, saying there are too many uncertainties that could affect gas prices going forward.

Mueller, formerly head of the Federation of German Consumer Organisations and environment minister from the Greens party in northern Germany's Schleswig-Holstein region, took over the network agency in March 2022, just days after Russia invaded Ukraine on Feb. 24.

Natural gas prices had already risen on fears of lost supply, although Western sanctions against Moscow initially spared oil and natural gas. There were concerns about Europe's dependency on Russian gas used to heat homes, generate electricity and fire up industrial processes like making glass and fertilizer.

What followed was a scramble to find alternative pipeline supplies from friendly countries like Norway and to line up floating terminals that can import liquefied natural gas that comes by ship from suppliers including the U.S. and Qatar.

Russia had already limited supplies in the run-up to the invasion, leaving storage low. Then it started cutting back supplies, first to countries that wouldn't meet a demand to pay in Russian currency. On Aug. 31, it cut off the major Nord Stream 1 pipeline to Germany, citing technical problems.

There's still a bit of Russian gas — about 7% of supply — flowing to Europe through Ukraine to Slovakia and via Turkey to Bulgaria.

The race to find new supplies was expensive — 10 billion euros went toward the floating terminals, and consumers are seeing painfully higher bills and inflation. But gas storage was full by December. Drawn down over the winter, storage facilities will have to be filled again over the summer.

One of Mueller’s first responsibilities as regulator was overseeing the establishment of a 24-hour crisis center next to his agency's skyscraper in Bonn, Germany’s capital until the 1999-2000 move to Berlin.

That’s where the agency would have decided which companies would get priority access to energy if supplies failed and the government declared a gas emergency. The center, equipped with diesel generators and stocks of food so it could operate even in a blackout, never had to be used.

Asked when he realized Germany had made it through the winter, Mueller said he was reassured by the full storage levels around Christmas. But complete relief is yet to come.

“When it's really spring here will be the moment when we will have made it," he said. “We're still a couple of weeks away, and I'd rather stay cautious.”