Germany's gas price cap much cheaper than expected: ifo

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BERLIN, Aug. 9 (Xinhua) -- Germany's gas price cap will be much cheaper than expected, costing only a third of what the government had originally set aside, the country's ifo Institute for Economic Research said on Wednesday.

Of the 40.3 billion euros (44.3 billion U.S. dollars) that were earmarked for the country's Economic Stabilization Fund last winter, only 13.1 billion euros will be used, the ifo Institute said.

"The reason is that gas prices have fallen sharply since then," said ifo expert Max Lay. "In 2024, we expect the cost to be zero, because many new gas contracts signed by ordinary consumers already fall below the price limit of 0.12 euro per kilowatt-hour."

Most of the relief money, 12.4 billion euros, is to go towards households, as well as small and medium-sized enterprises. Germany's industry will only receive around 700 million euros, while gas-fired power plants and larger residential units are not supported through the price brake.

"Even though energy markets have calmed, the estimated cost to the government remains highly uncertain because it is based on a forecast of market prices for the respective consumer groups," Lay warned.

Minister for Economic Affairs and Climate Action Robert Habeck is in favor of extending both the electricity and gas price brakes until Easter 2024. "The price brakes act like an insurance against rising prices," he told German newspaper Augsburger Allgemeine at the end of July. The energy price brakes are currently set to expire at the end of the year.

Gas prices in Europe have fallen significantly, after peaking at the end of August last year. European TTF (Title Transfer Facility) gas futures were trading at around 35.5 euros per megawatt hour on Wednesday.

"After a long period of crisis, we sense that the headwinds for our business are diminishing. We see our markets increasingly recovering," said Leonhard Birnbaum, CEO of German energy supplier E.ON, at the presentation of the company's first half (H1) 2023 results on Wednesday.

E.ON's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) went up by 40 percent year-on-year to 5.7 billion euros. The previous year's results had been "adversely impacted by the energy-industry environment," the company said. (1 euro = 1.10 U.S. dollars) Enditem

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