German government plans strategic gas reserve – costs up to €1.5 billion

The German government is planning to establish a state-owned strategic natural gas reserve for extreme emergencies, according to sources familiar with the matter. The initial costs for building the reserve and procuring the gas are estimated at up to €1.5 billion (approximately $1.72 billion).

Since Russia’s invasion of Ukraine forced Europe to scramble for alternative gas supplies, the vulnerabilities of Germany’s energy infrastructure have become glaringly apparent. The government has since been working intensively to bolster domestic energy security. The planned strategic reserve is designed to cover worst-case scenarios – such as sabotage of critical energy infrastructure or a severe global gas shortage.

Under the proposal from the Economy Ministry, the reserve would hold around 24 terawatt-hours of gas – roughly 10 percent of Germany’s total storage capacity. That amount would be enough to supply up to two million German households with heating and hot water for an entire year. The cost of building the reserve, purchasing the gas and injecting it into storage is estimated at between €1.2 billion and €1.5 billion, spread across the 2027 and 2028 fiscal years. Annual operating and maintenance costs are expected to add another €150 million to €180 million.

Notably, the billion-euro price tag would ultimately be passed on to gas consumers through a levy. The government plans to phase in the initial gas purchases over two to three years to minimise disruption to market prices.

The draft legislation is expected to be approved by the cabinet in August. If given the green light, Germany would gain another pillar in its energy security framework, alongside its existing strategic oil reserve. However, consumer protection groups have already voiced concerns – with energy prices already high, additional levies would further burden households and businesses.