The European Union is more and more concerned about the jump in energy prices. On Wednesday, October 13, the European Commission (EC) approved measures that should mitigate the impact of price increases, as well as make the energy system more resilient to various influences. The measures were presented at a press conference by European Energy Commissioner Kadri Simson.
Reasons for the rise in energy prices
The European Commission cites a number of reasons for the rise in energy prices. The first is the increase in global demand for them as a result of the recovery from the economic crisis caused by the pandemic. This led to a jump in prices, primarily for gas. “The world is starting to recover from covid, and it is hungry for energy,” said Simson. Since gas plays an important role in the formation of electricity prices, electricity prices have risen after gas.
The weather also played a role: cold winters and periods of abnormal summer heat resulted in high energy consumption. As a result, gas reserves in the EU are now significantly lower than usual. On average, over the past 10 years, by this time of the year they were at the level of 90%, whereas now they are 78%.
Does the European Commission blame Russia for the rise in gas prices?
Russia is also mentioned in the European Commission, albeit in the most neutral way. The document with measures submitted by the EC notes that the volumes of gas supplies from the Russian Federation were “lower than expected”. “Although Gazprom is fulfilling long-term contracts with its European counterparties, it offered either insignificant additional capacity, or did not offer them at all to ease the pressure on the EU gas market,” the document says. DW source in the European Commission adds that such actions of “Gazprom” may have a market explanation, for example, higher prices for “blue fuel” in Asia. “Nevertheless, we believe that based on market conditions, suppliers such as Gazprom should be expected to increase supplies (of gas to the EU. – Ed.) “, – notes the source of the publication.
Previously, many politicians in the EU accused Russia of not wanting to supply more gas in order to achieve the launch of Nord Stream 2. In its own document, the EC only cautiously writes about the emergence in Europe of “concern” about “possible violations of competition” on the part of “companies operating in the gas markets of Europe.” “The European Commission is now investigating all suspicions of possible anti-competitive behavior of companies producing and supplying natural gas to Europe as a matter of priority,” the EC added.
The journalists at the press conference were interested in the question whether such an investigation is also underway against Gazprom. But Kadri Simson, in her usual manner, shied away from political statements. The only thing she said was that the EC monitors “all kinds of speculation.”
European Commission: The Energy Crisis Has Only One Solution
The only long-term solution to the problem in Brussels is considered to be renewable energy sources. “The transition to” clean “energy will be the best insurance against price shocks, such as the one that the EU is experiencing now,” the EC noted. However, this transition will take decades. To overcome the current crisis, the European Commission has presented a set of short and medium term instruments.
Short-term measures are aimed primarily at mitigating the blow from higher prices to consumers and businesses in the EU. These measures include social support for people unable to pay for energy – for example, in the form of vouchers, partial payment of utility bills, or deferred payments. Another measure is the reduction of taxes, which make up a large part of the payment for energy carriers. Also, the EC advises to protect consumers from disconnecting from the networks. All these actions are in the hands of the EU member states, the European Commission has only collected possible measures together as recommendations.
But the strengthening of cooperation with other countries is under the jurisdiction of the EC. No specific countries are mentioned, but Simson noted that Norway has already announced an increase in gas supplies to the EU. A DW source in the EC added that this is also about Ukraine. “We really want to work with Ukraine in the spirit of mutual solidarity. Not only EU solidarity with Ukraine in the purchase of energy resources, but also vice versa – Ukraine’s solidarity with the EU,” the source said. He points to the fact that Ukrainian gas storage facilities have the largest volumes in Europe, and EU companies already hold their reserves of “blue fuel” there. They are going to work on this further.
Medium-term measures to strengthen the gas and electricity market
At the EU level, however, mainly medium-term measures are found. One of them is to increase the efficiency of gas storage. In December, the European Commission promises to present a draft update of the EU regulation on the safety of gas supplies. One idea is to facilitate cross-border access to storage facilities. The fact is that while some EU countries have large gas storage facilities, others are practically non-existent.
In addition, the European Commission is considering the possibility of general purchases of gas to create its reserves. Participation in such promotions will be voluntary. Other measures include the development of energy storage technologies, in particular with the help of batteries and hydrogen.
When will energy prices go down?
The European Commission is expecting a decrease in prices and stabilization of the market only in April next year. At the same time, Brussels emphasizes that there is no threat to be left without gas or electricity, although they add that special attention should be paid to individual regions.
The European Commission notes that the jump in prices concerns, first of all, wholesale prices. If wholesale gas prices throughout the EU have grown this year by more than 400% compared to 2019, retail prices have increased by 14%. For electricity, the growth was 230% for wholesale prices and 7% for retail. This is because the wholesale price averages about one third of the final cost to consumers.