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ENERGY

Germany to thrash out details of €200 billion energy support package

Chancellor Olaf Scholz is meeting with Germany’s 16 state leaders on Tuesday to work out the details of the country’s energy relief packages and a cap on the price of gas. But a few questions remain open.

Cash on a radiator in Germany.
Cash on a radiator in Germany. Photo: picture alliance/dpa/dpa-Zentralbild | Patrick Pleul

What’s happening?

With power bills more than doubling in some cases, German federal and state leaders have decided more support is needed. Chancellor Scholz last week announced a €200 billion package to cushion the blow for people in Germany yet further.

One of the most expensive planned measures is a Gaspreisdeckel – or a cap on the price of gas households would pay this winter.

That comes on top of a combined €100 billion in relief spending over three spending packages already passed in the Bundestag. The last one, amounting to €65 billion, was passed only about a month ago.

Those packages are paying or have paid everything from the popular €9 nationwide public transport ticket, a VAT cut on gas bills, to one-off energy and cost of living relief payments.

But that wasn’t enough for many state leaders, who began calling for a gas price cap.

READ ALSO: KEY POINTS: Everything Germany is doing to help relieve rising energy costs

These calls also come from across the German political spectrum.

Both Markus Söder, the Bavarian premier from the conservative Christian Social Union (CSU) and Berlin mayor Franziska Giffey of the Social Democrats, have been particularly vocal in their support for a gas price cap.

Is a gas price cap coming?

Households in Germany are very likely to see a cap on their gas bills of some sort this winter.

What’s not clear yet – and what federal and state leaders are hammering out Tuesday – is how precisely it will work in practice, when it might come in, how long it will last, and how it’ll be paid for.

The SPD-led government of Mecklenburg-West Pomerania and national Green co-leader Ricarda Lang want a gas price cap that would cover 80 percent of what households use.

German state leaders attend the conference on Wednesday.

German state leaders attend a conference. Photo: picture alliance/dpa | Bernd von Jutrczenka

Under a plan like that, 80 percent would be termed a “basic consumption” requirement and capped in price for the average consumer. The other 20 percent would float according to the market rate for gas – to help encourage people to still save energy.

Söder’s Bavarian CSU has previously advocated for a 75/25 percent split between the capped portion and the floating portion to encourage more energy saving.

The government is then on the hook to pay the rest.

READ ALSO: Why did Germany make a U-turn on gas levy – and what do the new plans mean?

The cap is likely to last for the winter months at least, although this depends on Tuesday’s government talks, which also cover the thorny issue of how the government intends to pay for the cap.

The German Institute for Economic Research’s Marcel Fratzscher told broadcaster RTL and ntv last week that a cap alone could cost anywhere between €30 and €50 billion.

The Scholz government wants to pay for this primarily by running up government debt, something Finance Minister Christian Lindner has reservations about, as it would mean suspending Germany’s constitutional debt brake.

The federal state governments would be expected to pay for at least some of it, and any disputes Tuesday could hamper an agreement—potentially delaying the start of any cap or further relief measures.

A €9 ticket successor and relief for small businesses. What else do Germany’s states want?

Germany’s 16 federal state leaders are also bringing in a list of other measures they want to see from Scholz’s promised €200 billion in relief spending.

Chief among these is the unresolved question of how to pay for the planned successor to Germany’s popular €9 nationwide public transport ticket this summer.

Politicians are floating the idea of a more expensive €49 ticket, although the price could reach above €60, depending on how much money federal states are willing to kick in for it along with the federal government.

READ ALSO: Germany to set out plans for €49 transport ticket in October

North-Rhine Westphalia premier Hendrik Wüst is also calling for the federal government to make more money available for refugee housing, particularly as around 1 million Ukrainian refugees have arrived in Germany since the Russian invasion began in February.

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ENERGY

Qatar agrees to ‘long-term gas supply’ deal with Germany

Qatar has agreed to send Germany two million tons of liquefied natural gas a year for at least 15 years, officials said Tuesday, as Europe's biggest economy scrambles for alternative supplies after Russia's invasion of Ukraine.

Qatar agrees to 'long-term gas supply' deal with Germany

Qatar’s Energy Minister Saad Sherida al-Kaabi said up to two million tons of gas a year would be sent for at least 15 years from 2026, and that state-run QatarEnergy was discussing other possible deals for Europe’s biggest
economy.

Kaabi, who is also QatarEnergy’s chief executive, said so many European and Asian countries now want natural gas that he did not have enough negotiators to cope.

The talks for the latest deal took several months as Germany has resisted the long-term contracts that Qatar normally demands to justify its massive investment in the industry.

Russia’s invasion of Ukraine in February increased pressure on the German government to find new sources. And the latest deal will not help the country get through the looming winter.

The gas will be bought through US firm ConocoPhillips, a long-term partner with QatarEnergy, and sent to a new terminal that Germany is hurrying to finish at Brunsbuttel.

“We are committed to contribute to the energy security of Germany and Europe at large,” Kaabi told a press conference after the signing ceremony with ConocoPhillips chief executive Ryan Lance.

Lance hailed the accord as “a vital contribution to world energy security”.

READ ALSO: EXPLAINED: What are Germany’s alternatives to Russian gas?

Qatar last week announced a 27-year agreement to ship four million tons a year to China. It said this was the longest contract agreed in the industry.

Qatari officials would not discuss prices but industry analysts have said Germany will have to pay a premium for the shorter contract and the hurried start to deliveries.

Intense demand

Kaabi again stressed the “sizeable investments” that his country has made in extracting gas for deliveries around the world.
But he also said that Qatar was negotiating with German companies to further increase the “volumes” being sent.

The gas will come from the North Field East and North Field South projects that Qatar is developing with ConocoPhillips and other energy multinationals.

North Field contains the world’s biggest natural gas reserves and extends under the Gulf into Iranian territory.

Through expansion in North Field, Qatar is aiming to increase its production by 60 percent by 2027. With increases in international prices, the value of its exports has almost doubled in the past year, state media said
recently.

Asian countries led by China, Japan and South Korea have been the main market for Qatar’s gas, but it has been increasingly targeted by European countries since Russia’s war on Ukraine threw supplies into doubt.

“There is very intense discussions with European buyers and with Asian buyers,” Kaabi said, highlighting the “scarcity of gas coming in the next few years”.

“We do not have enough teams to work with everybody, to cater for the needs” of all countries making demands.

Kaabi said the deal with China’s Sinopec showed that “Asian buyers are feeling the pressure of wanting to secure long-term deals… I think we are in a good position.”

The Brunsbuttel terminal supplies customers of German energy companies Uniper and RWE, and Economy and Energy Minister Robert Habeck said the two firms “have to buy on the world market.

“It is clear that the world market has different suppliers, and it is smart from the companies to buy the most favourable offers for the consumers on the world market, and that includes Qatar.

“But this is not the only supplier on the market.”

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