Germany's gas storage levy is "against union law" as it hinders cross-border trade, effectively making Germany an entry zone only, Austrian area market manager AGGM executive board member Bernhard Painz told Argus in an interview.
The German storage levy charges a fee on all gas exiting the German grid, set at €1.86/MWh for January-June, with the aim of recouping money spent to purchase strategic reserves in 2022.
AGGM is "really surprised" that the European Commission, which is "explicitly informed about the case", has not taken action against it. The levy has caused export flows from Germany to all neighbouring countries to collapse, and has resulted in Austrian prices becoming "sort of decoupled from the northwest European market", Painz said.
"Neither short-term trading nor long-term commitments for gas deliveries from Germany may develop in this situation," Painz said, noting that there is a "very high" chance that the levy will increase further in the future, meaning that "market-driven efforts to diversify the sources of supply for the Austrian gas market will be prevented". His comments echo those made by Austrian energy regulator E-Control's executive director, Alfons Haber, in a recent interview with Argus.
The Austrian day-ahead price has held an average discount of €1.02/MWh to its German counterpart so far in January, and averaged a discount of €0.86/MWh across the fourth quarter of 2023. These discounts mean that there is no financial incentive for exports from Germany to Austria — total net imports from Germany at Oberkappel last year fell to 25TWh from 54TWh in 2022. Total German export flows in all directions last year dropped to 187TWh from 499TWh in 2022.
The significant drop in exports from Germany "not only means that the levy generates quite low income for [German market area manager] THE", but because of the lower utilisation rate of German exit points the tariff revenues of German transmission system operators (TSOs) is now much lower too, Painz said.
"In summary, the reaction of market participants to the levy could mean that the total costs that German gas network users have to pay could be even higher than without the levy being applied at cross-border points," Painz concluded. Austria could introduce a storage levy of its own if Germany's is found to be compatible with EU law, a measure that is being considered but "not yet foreseen", but Germany's experience is "not really a success story", he said.
The potential introduction of a storage levy in Italy would harm the Austrian market further, meaning "the Austrian market would not only be decoupled from the northwest European market but also from the Italian market", making Austria's attempts to diversify away from Russian gas even more difficult.
But increasing import capacity from Italy is still of "great interest" in order to support diversification efforts, Painz said. The technical entry capacity of the TAG pipeline into Austria is higher than the exit capacity on the Italian side, but Italian system operator Snam is "currently planning to implement technical measures to align its exit capacities with the TAG entry capacities until 2027".
No plans to liquidate Austrian reserve
There are currently "no specific plans" regarding the liquidation of the 20TWh Austrian state gas reserve, which similarly to its German equivalent was bought unhedged during the period of peak gas prices, Painz said.
The legal basis for the storage reserve was extended in November until 1 April 2026, but only allows for withdrawals from the reserve in the event of energy shortages as declared by the competent ministry. This means that at present there are "no specific plans as to when the reserve of 20TWh or parts of it will be liquidated", Painz said.
As long as no additional technical import capacities from Germany are available, maintaining high storage levels is "crucial for security of supply in Austria all year round", so AGGM "would not recommend an earlier liquidation of the reserve", Painz said.
The "uncertainties associated with gas imports in Europe over the last two years have definitely increased the importance of gas storage for security of supply", while these uncertainties have also driven high price volatility, Painz said. High demand for storage capacities is a result of "both security of supply considerations and hedging against price volatility".
The state reserve takes up 20TWh of Austria's total storage capacity of roughly 97.6TWh, or around 20pc. While this is a significant volume tied up by the reserve, "in view of the need for high storage levels throughout the year to ensure security of supply, the respective contribution made by the strategic gas reserve is still necessary and in our view, has no significant impact on the functioning of the gas storage market", Painz said.
