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ENERGY

German government ‘fears millions of heating systems could fail in winter’

If gas becomes scarce in winter, the German government is concerned it could start a chain reaction that would cause millions of household heaters to stop working, German media reported on Friday.

Digital thermostats
A digital thermostat shows freezing temperatures. Photo: picture alliance/dpa | Jens Büttner

Germany has been looking ahead to winter with concern amid fears of energy shortages and potential rationing, but according to a report in Bild newspaper, a reduction in the gas supply could have other unintended consequences.

If gas supplies become scarce, the government fears that the low pressure in the pipelines could cause millions of household heating systems to malfunction.

The concerns were raised in a confidential meeting between the head of the Federal Chancellor’s Office, Wolfgang Schmidt (SPD), and the heads of the state chancelleries on Wednesday, according to Bild. 

In the event that heating systems do fail, there could also be delays in getting them up and running again.

This is because professional expertise would be required for the heating systems to be reconnected to the gas supply, which could mean households are left in the cold until they can find an engineer. 

To avoid this happening, the government has demanded that utilities companies give at least 24 hours’ notice in the event of supply issues. This would prompt the Federal Network Agency to step in and take control of the gas distribution.

Frosty reception for gas levy

With Russia reducing its gas supplies into Germany in recent weeks, energy suppliers such as Uniper have been forced to make up the shortfall by purchasing gas elsewhere at short notice.

The ongoing supply issues have contributed to soaring prices on the energy market, with wholesale gas prices now five times higher than they were a year ago.

On Thursday, the cabinet voted through plans to introduce a levy on gas products that would allow struggling companies to pass their additional costs onto consumers.

However, the introduction of the levy – which could see families’ gas bills go up by around €1,000 per year – has sparked a debate about whether VAT should continued to be charged on energy products during the crisis.

READ ALSO: What is Germany’s new gas ‘tax’ and who will pay it?

Jens Spahn, the deputy leader of the CDU/CSU parliamentary group, criticised the levy for having “technical flaws” and being “unfair” on consumers.

“It is almost cynical that the state is still earning money from the special levy via VAT,” Spahn said. “Citizens are paying up to €100 more than they need to.”

With VAT calculated as a percentage of gas bills, any additional charges, such as the levy, will have the effect of raising the amount of tax households have to pay.

Critics of the plans say this goes against the principle of offering relief from high energy costs and will place an unnecessary burden on households.

Jens Spahn (CDU/CSU) delivers a speech in the Bundestag

Jens Spahn (CDU/CSU) delivers a speech in the Bundestag. Photo: picture alliance/dpa | Britta Pedersen

Currently, the FDP-led Finance Ministry is said to be looking at ways to ensure that the state doesn’t earn additional income through VAT on the back of the levy. 

“This is non-negotiable,” Economics Minister Robert Habeck (Greens) said on Thursday. 

So far, the government hasn’t determined how high the gas levy will be, though Habeck has predicted that it will be somewhere between 1.5 and 5 cents per kilowatt hour of energy.

The government is hoping to set the amount in stone by August 15th with a view to introducing the levy on October 1st.

As The Local reported on Thursday, there may also be legal issues that need to be resolved before the new charge can come into force. 

Current contract law stipulates that only the state, rather than private enterprises, can add a new levy to fixed-price contracts. 

This could cause difficulties since the government had intended for gas suppliers to apply the levy directly in order to compensate for up to 90 percent of their additional costs. 

READ ALSO: Germany’s gas surcharge plans face legal hurdle

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ENERGY

Gas crunch pushes German glassmaker to the brink

In 400 years, Heinz-Glas, one of the world's biggest producers of glass perfume bottles, has seen off many crises - including World Wars and the oil shock of the 1970s in the last century alone. But Germany's current energy emergency strikes at the heart of its very existence.

Gas crunch pushes German glassmaker to the brink

“We are experiencing an exceptional situation,” Murat Agac, deputy chief executive of the family-owned company founded in 1622, told AFP.

“If there is a halt in gas supplies… then glass production will very likely disappear” from Germany, he said.

To make glass, sand is heated to temperatures of up to 1,600C and gas is the most frequently chosen source of energy.

Until recently, a glut of gas flowing to Germany via a pipeline from Russia had helped keep production costs low, allowing Heinz-Glas to book annual revenues of some €300 million.

With competitive prices, exports made up 80 percent of the glassmaker’s total output.

But this economic model is now being called into question after Russia’s invasion of Ukraine.

READ ALSO: Energy crisis to labour shortage – Five challenges facing Germany right now 

Moscow has cut gas supplies to Germany by 80 percent, in what is believed to be a bid to weaken the resolve of Europe’s biggest economy in backing Ukraine.

Berlin is scrambling for alternative energy sources to replace the resource that once made up 55 percent of its total gas imports.

The consequence: soaring energy prices.

For Heinz-Glas, that has meant a “ten- to 20-fold increase” in costs compared to 2019, said Agac.

READ ALSO: German government fears millions of heating systems could fail in winter

‘3,000 football fields of solar panels’ 

Not only Heinz-Glas, much of Germany’s industry is buckling under the gas supply crunch.

Many companies are drawing up emergency plans as the German government has warned that Russian gas could stop flowing entirely.

With winter looming, the crisis is reaching fever pitch.

Chemicals giant BASF is looking at replacing gas with fuel oil in its second-biggest German factory.

Henkel, which specialises in adhesives and sealants, is considering whether its employees can work from home.

But the consequences of a total halt in Russian gas flows could be irreparable for many companies.

At the Heinz-Glas factory in Kleintettau, opened in 1661, around 70 tonnes of small glass bottles are produced each day, moulded by the heat of the furnaces.

An employee inspects flacons on an assembly line at the German glass producer Heinz-Glas Group in Kleintettau, Germany on August 3rd, 2022.

An employee inspects flacons on an assembly line at the German glass producer Heinz-Glas Group in Kleintettau, Germany on August 3rd, 2022. Photo: Ronny Hartmann / AFP

The delicate vessels adorned with intricate motifs are then sent to the company’s clients — including its biggest, French group L’Oreal — which fill them with perfume.

At every step of the production process — from making the material with quartz sand to the final sculpting of the bottle — heat is essential.

At the company’s second-biggest factory in the mountain village of Piesau, a cut in gas would permanently damage its glass furnace, said Agac.

To ward off the danger in the short term, Heinz-Glas has invested in stocks of liquefied gas, which can be driven in by trucks.

But that triples the energy bill, and would still not be sufficient – the two German factories need the equivalent of “3,000 football fields of solar
panels” to operate.

In the long term, replacing the entire gas system with electric infrastructure would cost €50 million, Agac said, a sum which the company cannot afford.

READ ALSO: Reader question – Should I modernise my heating system in Germany?

Even in the factory of Kleintettau, where furnaces are powered by electricity, around 40 percent of the industrial processes still require gas.

“We need state support,” said Agac, warning that the firm may otherwise be forced to shift production elsewhere, such as India or China, where it already has a factory.

For the 1,500 employees of the company in Germany, the future looks cloudy.

“I’ve reached an age when it doesn’t matter so much for me anymore. But younger people must be fearing job losses,” said Michaela Trebes, 61, inspecting hundreds of little flasks emerging from the production lines.

But for now, the management remains optimistic that Heinz-Glas can pull through.

Since 1622, “there have been enough crises… in the 20th century alone, World War I, World War II, the oil crisis in the 70s, many, many critical situations. We survived them all,” said Agac.

“We will somehow also overcome this crisis.”

By Florian CAZERES

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