Take a cold shower, turn down the heating and produce less: drastically reducing gas consumption has become a key factor for a secure energy supply. Researchers at the Hertie School therefore advocate increasing the price pressure on consumers. The higher the price for everyone, the greater the incentive for everyone to save, says energy economist Oliver Ruhnau from the Hertie School. Redistribution is necessary, but not through price: “That would destroy the incentive to save.”
ntv.de: In view of the gas shortage, politicians are urgently calling for gas to be saved. How are German households and companies reacting to the price explosion on the gas market and such appeals?
Oliver Ruhnau: The German companies actually adjusted their demand very quickly, as we found out in a study. They started cutting consumption significantly back in September, when wholesale prices were just beginning to rise. Private households, on the other hand, only began to reduce their consumption in March and April, i.e. with the invasion of Russia in Ukraine.
And who saved more iron – the private or commercial consumers?
The industry has reduced its consumption by an estimated 11 percent since the beginning of the crisis since September. The households since March by about six percent.
Doesn’t that have something to do with the weather?
No, the weather was excluded from our calculations.
Based on your study results, can you quantify how much more is possible?
It’s very difficult to say because all the information is based on surveys, which we don’t know how representative they are. In view of the price increases, however, one can expect that consumption will be further reduced. Mainly because not much of the price increases on the gas market has reached private households. So far, the cuts we’re seeing here have been more politically or ethically motivated than financially – so they’ve been made more out of empathy for Ukraine. If the price increases arrive, the demand is likely to fall again. However, the big question is whether so much can be saved in the summer, when there is no heating.
Energy consumption is considered to be not very price-elastic, which means that price changes are said not to be felt to the same extent in demand. Your results disprove that. What conclusions do you have to draw from this?
In fact, it contradicts the conventional assumption that energy consumption is very inelastic. But we also have a very unusual situation. Prices have gone up seven or tenfold. We haven’t seen anything like this before. In comparison, a ten percent reduction in fuel consumption is still disproportionate and not overly flexible. Nevertheless, it is correct: Since we can observe this reaction from consumers, subsidies would be the wrong tool at this point. It would destroy or disrupt the incentive to save. Price pressure helps in the gas crisis.
It looks like we’re stuck in a bail-out situation again. The largest German gas company Uniper is already threatened with bankruptcy. The federal government has therefore decided to facilitate state aid for ailing energy companies such as Uniper. Isn’t that counterproductive because it reduces the pressure to save?
Uniper bought gas in Russia from Gazprom at a bargain price, which is now not being delivered. This gas has to be bought on the market at great expense, and that breaks the company’s neck. Dropping such a large corporation can have dangerous domino effects for the entire energy industry, similar to what happened during the financial crisis. Not only consumers, but also other suppliers are Uniper customers. If Uniper goes bankrupt, chaos reigns. Consumers get nothing from that. If thousands of Uniper customers switch to other providers, that doesn’t make the situation any better. Because they can’t secure the gas supply either. The problem is and remains the gas shortage.
The Federal Government has also decided to amend the Energy Security Act. A method of apportioning the price increases to the shoulders of all customers is planned. Does that help?
The idea behind it is that not only a single group that is in trouble, like Uniper, can only pass on higher prices to its own customers, but that the high costs of new procurement are shared among as many consumers as possible. The idea is that the savings incentive should not depend on the energy company that a customer is with. All consumers – preferably new customers and existing customers – thus have the same incentive to save energy.
Low-income families, retirees with low pensions or recipients of Hartz IV could be worsened by the watering can principle. Perhaps they have contracts with better positioned energy providers. They will not be able to gain anything from such a pay-as-you-go process.
It is good or bad luck which group and which customers are hit or not. The measures that are taken should now be independent of this. Uniper, for example, has hedged well, but had bad luck. The important thing is that the incentive to save and the relief for certain consumers must be mentally separated. Ideally, the levy creates an important incentive for everyone to save. In order to make the whole thing socially just, there must of course also be a bonus, a payout, depending on need, depending on the social situation. That is a task for the social politicians. People in need need support, but without giving them an incentive to use more energy than others. We are facing an immense challenge. We must not forget that all the savings made so far, all the measures, including LNG, are still not enough to get through the winter in the event that Russia cuts off gas supplies completely. The greater the number of people who save gas, the more realistic it is that we will master this task. Consumers save gas, but it’s not enough.
Because of the gas bottleneck, the government has also considered another measure: it wants to give the industry an incentive to save through reverse “gas auctions”. Is this a sensible or necessary measure?
This is about the auctioning of gas consumption reductions. Companies are paid to curb their consumption. It is actually questionable whether these reverse gas auctions are really necessary alongside the strong price signal that is already having an effect. If the price signal is allowed to continue to have an effect, or if politicians are thinking about how to further strengthen this effect, then these reverse gas auctions will be superfluous. The auctions would only open up another distribution mechanism. You pay money to the industry instead of looking at neediness. They also raise the question: reduction for what purpose or when? We have already reduced gas consumption. Should another additional reduction be auctioned now or the reduction compared to the level before the crisis? That would mean that the industry would get money for the eleven percent savings that have already been made. I see a lot of question marks there.
Diana Dittmer spoke to Oliver Ruhnau
