The Federal Cabinet has today passed a bill to reduce the consumption of gas used to generate electricity in the event of an impending gas shortage. The suggested wording for an „Act on the Maintenance of Substitute Power Stations“ will now be presented to the German Bundestag via the parliamentary groups of the coalition government and further considered in parliamentary proceedings.
The bill serves to increase precautions in the event of a possible gas shortage, which could arise, for example, due to a halt in gas supplies from Russia. Provisioning needs to be increased to prepare for such a scenario and, in such a situation, Germany needs to be able to significantly reduce the consumption of gas used to generate electricity. The passed bill creates the necessary conditions for these measures to be taken. In 2021, gas covered approx. 15% of power generation, but this proportion is likely to have declined in the first months of 2022.
Specifically, a gas replacement reserve will be established to increase provisioning, a measure that is to be in place until 31 March 2024. The bill passed today therefore provides for coal or oil-fired power stations in existing reserves to be upgraded. These should be able to return to the market at short notice and on demand. The replacement reserve will only be called upon if there is a gas shortage or the threat of one. The power stations in the reserve are ready for operation but are not active on the electricity market, meaning that no additional carbon emissions are produced. The urgent goal of completing the coal phase-out in Germany by 2030 remains unaffected.
In addition, the Federal Government wants to be able to quickly reduce electricity generation from gas-fired power stations in the event that the gas supply system is jeopardised. In order to be able to do so, an authorisation to issue ordinances is to be created so that the government is able to reduce the use of gas-fired power stations very quickly and for a maximum period of six months in the event of a crisis. The authorisation to issue ordinances takes into account that some power stations not only provide electricity but also heat.
The measures in detail:
Act on the Maintenance of Substitute Power Stations to Reduce Gas Consumption in the Electricity Sector in the Event of an Impending Gas Shortage
On call: use of power stations from the grid reserve on the electricity market
The first measure concerns systemically relevant hard coal-fired power stations for which a ban on coal firing would take effect in 2022 and 2023 (2022: 2.1 GW; 2023: 0.5 GW). There are also power stations in the existing grid reserve that are not operated with natural gas (approx. 4.3 GW hard coal-fired and 1.6 GW oil-fired).
These power stations can return to the electricity market for a fixed period of time if the security or reliability of the gas supply system is jeopardised. The Federal Government must determine this risk in a statutory instrument . Operation on the electricity market is voluntary. The opportunities and the risks lie with the operator.
In order for the power stations to be ready for market operation in the event that they are called upon, the power station operators must ensure the following by a specific deadline:
• The power stations must be brought into a certain technical condition that allows them to operate on the electricity market on a permanent basis. The costs incurred for this will be reimbursed. No costs will be reimbursed during the period when the power stations are waiting to come onto the market.
• The power station operators have to stockpile a certain amount of fuel..
The Act on the Maintenance of Substitute Power Stations could make considerable additional power station capacities available to the electricity market for a crisis situation.
On call: use of power stations from the adjusted security reserve
The existing security stand-by system (SiBe 1.0) – approx. 1.9 GW of lignite-fired capacity – will be adjusted. In future, the power stations are to be available earlier than before. At the end of the security standby period, the lignite-fired power stations are to be temporarily transferred to a new supply reserve (SiBe 2.0) until 31 March 2024. The power stations can be called upon from SiBe 2.0 by order of the Federal Government if the situation makes this necessary. Should this happen, they also temporarily return to the electricity market.
Authorisation to issue ordinances to limit electricity generation at gas-fired power stations
In order to be able to reduce the use of gas-fired power stations very quickly in the event that the gas supply system is put at risk, an authorisation to issue ordinances without the consent of the Bundestag or Bundesrat is granted for the Federal Government. Gas-fired CHP plants are only to generate electricity in the event of a crisis if there is no alternative for heat generation. As, in these cases, coal-fired power stations set the price on the power exchange, this will not increase electricity prices. The ordinance is valid for a maximum period of six months. Using this measure, gas consumption can be further reduced.
Further measures to reduce the consumption of gas used to generate electricity
In addition to these measures, the bill provides for further measures that contribute to reducing gas consumption in power generation:
• Redispatch: When deploying power stations to cope with grid congestion, grid operators are given more flexibility for a limited period in the choice of the power stations to be ramped up.
• Coal-replacement premium in the Combined Heat and Power Act: The period for claiming the coal-replacement premium under the Combined Heat and Power Act will be extended to 30 March 2024. This enables coal-fired power stations to be operated longer for a transitional period. Further incentives are provided to make the operation of CHP plants more flexible.
• Strategic coal reserve: The bill provides for the authorisation to issue ordinances to secure the energy supply. An ordinance might set out requirements for the stockpiling of fuels (amendment of the existing section 50 Energy Industry Act). This power to issue ordinances is not having to be used at present. It serves to strengthen preparedness.
These precautionary measures are further steps on the path to creating independence from Russian gas imports.