Review of the year and outlook

I hope you had a wonderful Christmas time and got some lovely presents. For many gas grid operators, November 27 was something of an early gift. On that day, the EU Commission, the Council and the EU Parliament reached a compromise on the new Gas and Hydrogen Directive. It went perfectly for the German grid operators. The EU Parliament's position on the unbundling rules was adopted one-to-one in the compromise. This means that distribution system operators can now also operate hydrogen grids. How many kilometres of hydrogen grid they will actually operate at the end of the day is an entirely different question. At the beginning of December, I hosted an ener|gate Webtalk with the ener|gate journalist Michaela Tix on the topic of ‘Green heating market - without gases?’. The four participants in the discussion agreed that the use of hydrogen and biomethane will hardly play a role in decentralised heat supply. The participants saw greater potential in CHP plants combined with small and large district heating grids. However, there is still a great deal of uncertainty regarding future development paths in the heating sector, at least wherever existing district heating grids are not the backbone of the future heat supply.

It remains to be seen whether there were any gifts for potential suppliers and consumers of hydrogen in mid-December. The general agreement on the 2023 and 2024 federal budgets – after the German Constitutional Court declared the financing of the Climate and Transformation Fund to be unconstitutional – does not provide for any significant cuts in the hydrogen market ramp-up. Unfortunately, such agreements often do not last in the governing coalition. At the time of going to press, the package was already falling apart again.

Dr. Heiko Lohmann
Freelancer

E-Mail +49 30 8824005

Topic of the month: Review of the year and outlook

From a pure gas industry perspective, it was basically an almost relaxed year. The market reached a new equilibrium that reflects the increasing exposure to the global LNG market. Risk premiums were largely priced out over the course of the year, the curve became increasingl ‘flat’ and the spreads between the futures products narrowed. This also applies to the Calendar Years 24 and 25, where backwardation switched to contango at the end of the year, to use traders’ lingo.

The market remains structurally tight. Thus prices are not at pre-crisis levels and volatility remained high. There were also market phases with quite irritating price overshootings, for example in response to possible strikes at Australian LNG terminals in August and September. And we are not out of the woods. The Russian war against Ukraine continues, and hybrid warfare by Russia against European countries cannot be ruled out. The high gas prices have also led to a significant decline in demand from industrial customers, which is, of course, economically very undesirable.