Storage regulation and price cap: Market distortion instead of real solutions

• EU storage regulation artificially drives up seasonal demand and keeps gas prices unnecessarily high.
• Negative summer/winter spreads on the gas market show that regulation is working against the market mechanisms.
• Kehler: "A competitive energy supply needs long-term investment security. Price caps and coercive measures thwart this goal."

The persistently cold weather and high demand for gas have led to further price increases on the gas market and falling gas storage levels in recent days. There is intense discussion on the market about the state filling level targets and the plans for a European cap on wholesale gas prices. Dr Timm Kehler, Chairman of the industry association Die Gas- und Wasserstoffwirtschaft, sees this as a dangerous way of combating symptoms that will worsen the situation in the long term.

Gas storage facilities in Germany and Europe are currently emptying faster than expected. The persistently cold weather and the increased demand for heating and power plants are playing a role, while storage targets and speculation are also decisive factors. During the energy crisis, Germany's storage regulation with binding filling level targets has made a valuable contribution to security of supply and sent a decisive signal against attempts at blackmail.

Storage regulation: crisis mode overtakes market mechanisms

However, the mandatory storage levels are now leading to considerable market distortions, driving up seasonal demand and preventing efficient pricing. This is particularly evident in the current negative summer/winter spreads in gas trading. "The contradictory fact that winter gas is currently cheaper than summer gas makes it clear that the current regulation is undermining the natural market mechanisms. Speculative bets on state storage filling are driving up costs for consumers and industry," explains Dr Timm Kehler, CEO of Die Gas- und Wasserstoffwirtschaft.

Price cap threatens investment security

In addition to these undesirable developments, plans for a European cap on wholesale gas prices are jeopardising security of supply. "This is tinkering with symptoms and will make the situation worse. Price interventions send the wrong signals for investments, reduce market liquidity and make Europe less attractive for international suppliers," criticises Kehler.

Together with other industry representatives, the European umbrella organisation Eurogas has issued an open letter to EU Commission President Ursula von der Leyen urgently warning against taking measures that could jeopardise Europe's energy and financial stability. The gas and hydrogen industry expressly supports this position: "We are behind the EU's ambition to accelerate the energy transition. However, security of supply, competitive energy prices and a stable financial system require functioning markets - not artificial interventions," said Kehler. "A competitive energy supply needs long-term investment security. Price caps and coercive measures thwart this goal and could lead Europe into a new energy crisis."

The gas and hydrogen industry is therefore calling on the European Commission and the German government to refrain from price interventions. According to the association, storage regulation must be revised and replaced by market-oriented solutions that guarantee security of supply. "Europe's energy future must be resilient and investment-friendly - not destabilised by short-term interventions," summarises Kehler.