The intervention of the European energy market has become an imperative to combat the blackmail of Russia and contain the “stratospheric” prices of gas and electricity. On the eve of the Council of Ministers of Emergency Energy, convened for tomorrow by the Czech Presidency of the European Union, the European Commission is moving forward and advancing its proposals to create a firewall that will ease the pressure on consumers in the short term and companies
The plan includes, among other measures, a mandatory saving of electricity consumption, a limit on the price of Russian gas that arrives by pipeline and a limit on the income that companies that produce electricity at lower costs – renewable, nuclear or hydraulic – obtain from high gas prices in the market.
Extraordinary situation
Despite the measures taken in recent months to diversify energy sources and increase gas reserves, which have exceeded the 80% target two months in advance (by 82%), “we are facing a extraordinary situation because Russia is an unreliable supplier and is manipulating our energy markets”, explained the president of the European Commission, Ursula von der Leyen, shortly before presenting her plans to the ambassadors of the Twenty-seven in a preparatory meeting of the twenty-seven emergency debate.
“We see that the manipulation of the gas markets has an indirect effect on the electricity market. We are facing astronomical electricity prices for homes and businesses and enormous market volatility,” he added.
To deal with the energy crisis, protect consumers and vulnerable companies and mitigate the rise in prices, Brussels proposes five lines of work. First, a mandatory cut in electricity consumption, as was already agreed last July for gas. Brussels puts the focus on achieving “smart electricity” savings through a reduction in demand peaks for “all consumers” to reduce overall consumption, including “those without smart meters », use less gas for power generation and achieve lower prices. “What has changed is that the global energy supply is scarce. We need a strategy to flatten the peaks that drive up the price of electricity”, explained Von der Leyen without specifying figures which, according to community experts, will be finalized after the ministerial debate.
They do appear, however, in a draft regulation proposal that has not passed the board of commissioners’ filter. The document proposes setting “a mandatory target of at least a 5% reduction in net electricity consumption during peak price hours”. Member States will be free to choose the most appropriate reduction measures although Brussels suggests the use of auctions or tenders that financially incentivize reduction, avoiding “subsidies to certain categories of consumers that unnecessarily distort other markets”. Each member will also decide which are the peak hours (which will cover between 10% and 15% of the 24 hours of the day) in which to reduce consumption by at least 5%.
The second major pillar of Brussels is the cap on the income of sub-marginal generation companies, which produce electricity at lower costs than gas. That is, limit the profits of renewables, nuclear or hydro and use these revenues to cushion the impact of the prices paid by consumers. “Low-carbon energy sources are generating windfalls that do not reflect production costs. It’s time for consumers to benefit from it,” says Von der Leyen. According to the draft, the maximum price could be 200 euros per megawatt hour (MWh), half the current price, although the figure could vary. Brussels recommends using the difference between the cap price and the market price to support vulnerable consumers and businesses.
Limit on Russian gas
Brussels is also considering creating a “solidarity contribution” for fossil fuel companies for the “unexpected benefits” they are also receiving due to high energy prices. “Oil and gas companies have also made massive profits. We will propose a solidarity contribution because all sources of energy must help to deal with this crisis”, said Von der Leyen. The idea is to invest this income to support vulnerable households and clean energy sources.
The plan also echoes the liquidity problems of energy companies and suggests making the rules on state aid more flexible to facilitate new lines of guarantees that can face the volatility of the markets. “They are being asked to contribute unexpected amounts of funds, which jeopardizes their ability to negotiate and the stability of futures markets. We will contribute to facilitating liquidity support,” said Von der Leyen, who will also seek the approval of the Twenty-seven to set a maximum price for Russian gas that arrives by pipeline, to “cut Russia’s income that Putin used to finance the atrocious war”.
It’s a controversial move that could trigger a further backlash from the Kremlin, which has already cut off supplies to 13 EU countries in whole or in part. In fact, Putin has already announced that Russia will stop sending gas to any country that imposes a price in advance. A threat that does not impress community technicians. “At the beginning of the war, gas from Russian pipelines represented 40% of all imported gas. Today it has been reduced to only 9%».
In contrast to the categorical rejection of Brussels’ proposal to reduce gas consumption by 15%, the Government led by Pedro Sánchez looks favorably on the new measures being studied by the European Commission to mitigate a possible cut in the gas by Russia, including the proposal to reduce the net consumption of electricity in the hours of greatest demand. Others, such as limiting the benefits of renewables or nuclear with a limit of 200 euros per megawatt (MWh) will not affect, since Spain launched this measure a year ago with a lower limit of 67 euros per MWh.
“Many of the proposals, practically all of the measures that the Commission has put on the table, are ideas that Spain has reviewed or has already put in place”, defended yesterday the Secretary of State for Energy, Sara Aagesen, after the Energy Sectoral Council, which brings together autonomous communities and town councils with the ministry.
A reduction in demand in these periods will not affect households in any case, at least not necessarily, since the contribution of domestic consumers will always be “voluntary”, according to Aagesen. According to some experts, the formula could be to reduce consumption with a service similar to the old interruptibility.
Spain sees with good eyes the proposals made by Brussels
He thinks that the limit on profits will not affect the electric companies because they already suffer from a lower ceiling
Sarah Led. Madrid