Germany Could Launch Natural Gas Subsidies Earlier Than Planned

The German government is looking to introduce a planned natural gas price cap for households and businesses as early as in January 2023, compared to initial plans for implementing the subsidy as of March or April.

Europe’s biggest economy is weighing the practical aspects of starting the gas price cap, which will be a form of subsidy, at the beginning of next year, a spokesperson for the German government said on Monday.

The energy industry association, BDEW, however, says that bringing forward the gas price cap cannot be done as of January because of the complexity of the technical and administrative changes necessary to be made at such short notice.  

Earlier this month, a panel of experts proposed measures to alleviate the impact of soaring energy prices on consumers, with steps including a one-off payment and subsidizing more than half of the expected gas consumption.

The experts recommended giving households and businesses a one-off payment worth a month of their respective gas bills and subsidizing between 60% and 80% of the expected gas consumption, while consumers will pay the rest at market prices. The one-off payment will be made in December, while the plan for the gas price cap was to be implemented in March or April 2023.

The commission will propose measures to blunt the impact of soaring energy prices on large industrial consumers at a later stage.  

The measures are expected to be part of and paid for by the planned $197 billion (200 billion euros) “defensive shield” to protect companies and consumers against the impact of soaring energy prices. At the end of September, the German government said that it would ditch earlier plans for a gas levy on consumers and instead would introduce a gas price cap to curb soaring energy bills.  

A one-off payment, as proposed by the expert commission, would be an immediate relief for residential and business consumers. But the subsidized gas bills could discourage consumers from savings. This would be the opposite of what Germany’s expert commission aims to do with a smaller part of gas consumption paid at market prices by consumers.

Germany’s energy regulator insists that “significant” gas and energy savings are necessary to avoid a winter of rationing and gas emergency. Households, industry, and businesses need to cut consumption by at least 20%, Klaus Müller, the president of the Federal Network Agency, Bundesnetzagentur, said earlier this month.

By Tsvetana Paraskova for Oilprice.com

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