Given historically low levels in gas storage facilities, Federal Economics Minister Katherina Reiche (CDU) is reportedly planning to secure gas storage levels through auctions of so-called Long Term Options (LTOs), according to the “Energy and Climate” newsletter of Politico, which cited several people knowledgeable about the matter.
The planned auction, intended for the autumn, is expected to increase the amount of gas covered by an as-yet undetermined volume. Discussions with relevant agencies are already underway to facilitate this measure. The principle behind this proposed action involves the gas market manager, Trading Hub Europe (THE). Through the auctioned options, THE reserves gas deliveries from traders and pays them a fee. Traders are then required to hold the specified gas volumes in their storage facilities for a set period and, if necessary, purchase additional gas. Should THE exercise the option, the traders must deliver the gas and receive a guaranteed maximum price.
The minister aims, according to the report, to use this method to incentivize the filling of gas storage facilities, which are currently situated significantly below legal requirements, at only around 56 percent. Politico reports that Minister Reiche’s ministry will determine by September 21-one day after the elections in Berlin and Mecklenburg-Vorpommern-whether and how these auctions can be utilized and increased.
However, Green Party MP Michael Kellner expressed critical views on Reiche’s strategy, telling the news magazine that the minister now recognizes the necessity of acting due to low storage levels. Nonetheless, he strongly criticized the plan, labeling higher LTO auctions merely a “late crutch.” He questioned whether the plan would function at all, or if it truly would ensure adequate gas reserves for a cold winter.
The Federal Ministry of Economics declined to elaborate on the specific plans for the auctions. In response to a request from Politico, a spokesperson stated that the ministry is in continuous dialogue with all market participants in the gas industry, independent of any specific issues. She added that the situation is being closely monitored to ensure the government remains capable of action. The spokesperson also clarified that the preparation for winter remains the responsibility of the market.
