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Germany unveils new measures to reduce gas consumption

The German government has unveiled new measures to limit gas consumption and prioritise the filling of its storage facilities in the context of reduced Russian supplies. The plan includes increased reliance on coal-fired generation, an auction system to incentivise lower consumption in industry and €15bn in credit lines via the state-owned investment and development bank KfW for the country's gas market operators to fill gas storage facilities faster. Specifically, the country intends to penalise gas-fired generation at some plants, effectively removing them from the market. In addition, 10 GW of coal-fired, lignite-fired and oil-fired plants will be made available in case of a critical gas supply situation. Indeed, a draft law, which is scheduled to be voted by the parliament on 8 July 2022, would set closure dates for 2.6 GW hard coal plants and allows some 4.3 GW hard coal and 1.6 GW fuel oil projects currently in reserve schemes to return to the market for a transitional period until 31 March 2024. Finally, the draft bill also set aside 1.9 GW of lignite-fired plants to be mobilised in case of critical circumstances. Trading Hub Europe, which operates Germany's nation-wide gas market area, is mandated to fill the gas storage facilities up to 90% by 1 December 2022, with intermediary targets of 65% by 1 August 2022 and 80% by 1 October 2022.

In March 2022, the country proposed higher renewable capacity targets to make the country's power supply almost 100% renewable by 2035. These measures are part of a broader plan aimed at reducing Germany's dependency on fossil fuels and at boosting its energy security. The country will support the procurement of LNG in the short term by accelerating approval procedures, promote biogas and the hydrogen economy, and will seek to switch to renewables in all sectors in the medium and long term. Germany will also promote energy savings in businesses and new buildings ("energy efficiency standard 55" mandatory as of 1 January 2023, minimum requirement of 65% renewable in every newly installed heating system as of 1 January 2024).

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