The legislative proposals that the European Commission will present next Tuesday, September 13 to intervene in the European energy market must include measures to reduce the demand for electricity in a coordinated way, to limit the extraordinary income of electricity producers such as renewables or nuclear and a new liquidity instrument to support energy operators operating in the futures market. These are some of the elements that received the support of the EU energy ministers during the extraordinary council held yesterday. The emergency meeting also mandated the EU executive to explore some kind of limit to the price of gas, although it still does not like the idea of putting an exclusive limit on the price of Russian gas.
The EU energy ministers thus endorse the bulk of the ideas launched in the middle of the week by the president of the European Commission, Ursula von der Leyen, to intervene in the European energy market and put an end to the price spiral in front of a situation that has been worsening this past year. “Today’s debate was not easy. This is not the last time we will meet to discuss energy prices. What we have done is give a clear message about what we have to do”, explained the Czech minister and chairman of the Council this semester, Jozef Sikela, about the four major areas that they hope to see reflected in the legislative proposals that will serve as basis for real negotiation.
And the first thing they consider urgent, in line with the ideas put forward by Von der Leyen, is to limit the income of sub-marginal electricity producers with low production costs, such as renewables or nuclear, with the aim of allocating this income additional to reduce the bill of consumers and companies. They also agree to launch a “solidarity contribution” from fossil fuel companies – oil and gas companies – that member states can use to mitigate the impact of high energy prices on customers.
Cap on the price of gas
The Twenty-seven also consider that the Brussels plan must include “emergency and temporary intervention” to curb gas prices, including a price cap. An idea not included in the Commission’s draft intentions, in which only a limit to the price of Russian gas appears. An idea that, although it generates sympathy in some capitals that endorse directly punishing the Kremlin for using gas as a “weapon of war”, does not arouse consensus. “It is a painful thing, particularly for Austria. We have managed to reduce dependence on Russian gas from 80% to below 50%, but we are still dependent. That is why we cannot support this proposal at this time”, admitted the Austrian minister, Leonore Gewessler. Hungary, Vladimir Putin’s main EU ally, went further. The Minister of Foreign Affairs, present at the meeting, called the idea absurd because it does not eliminate risks to security of supply.
Energy Commissioner Kadri Simson did not clarify whether they will eliminate the option of Tuesday’s battery of measures or whether they will extend the cap’s umbrella to all natural gas, including that imported from other producing third countries. “The ministers have asked us to analyze the effects of setting a cap on the gas of the rest of the imports into the EU”, but “if what we want with our proposal is to deal with Russian manipulation, it makes sense to consider a cap on Russian gas”, she recalled about a general cap that countries such as Belgium or Italy have been calling for for many months and which, according to her, could put security of supply in the EU at risk.
“The liquefied natural gas market is a global market and there is fierce competition. At this time it is important that, by losing Russian volume, we can opt for alternative suppliers. We are seeing other possibilities to reduce the price, replacing Russian production with other more reliable partners”, he explained without clarifying whether they will follow the Council’s mandate in this area. “It is the most complex thing that we have to decide”, admitted the Czech minister, who acknowledged that this issue needs “more work”.
According to Sikela, capping the price of gas should serve to “alleviate the social and economic consequences of the current high energy prices”, which means that it could resemble a kind of “Iberian exception” for the whole EU, a route included in the preparatory document of the Czech presidency, discarded so far by the Commission, but which is of interest to countries such as France or Romania, as explained by the third vice-president of the Government, Teresa Ribera.
The meeting also came out with a request to create “emergency liquidity instruments” to ensure that energy companies have at their disposal sufficient collateral to deal with the distorted markets that exist today.