Energy: Europeans pave the way for “unprecedented” emergency measures

BRUSSELS: EU energy ministers on Friday said they were in favor of a series of emergency measures to stem soaring gas and electricity bills, even mentioning a cap on the price of EU gas imports.

Meeting in Brussels, the representatives of the Twenty-Seven agreed on a “common orientation” to stem the surge in energy prices caused by the Russian offensive in Ukraine.

They asked the European Commission to prepare “a solid and concrete proposal within days”, said Czech Industry Minister Jozef Sikela, whose country holds the rotating EU presidency.

“We will present unprecedented measures next week to respond to an unprecedented situation,” replied Energy Commissioner Kadri Simson. “We are going to have a very difficult winter, but our energy union is solid and will prevail.”

Ahead of the meeting, the European executive had submitted to the Member States several possible, often complex, mechanisms, with the hope of arriving by Wednesday at a legislative project sufficiently consensual to be quickly approved.

While the idea of ​​confiscating superprofits from nuclear and renewables to redistribute them was welcomed, as was a possible objective to reduce electricity consumption, the proposal to cap the price of gas paid to Russia was debated.

“Solid Majority”

While Moscow threatens to stop its deliveries if such a mechanism is applied, Hungary, still very dependent on Russian hydrocarbons, showed its fierce opposition to this “new disguised sanction” likely to cause a “shortage”, while Prague denounced ” an unconstructive idea”.

In the end, “the dominant opinion was that we needed a cap on gas”, whatever its origin, “but the Commission must be given time to refine the way of implementing it”, said Mr. Sikela.

As Russian gas now represents only 9% of European imports (compared to 40% before the war), several States including Italy advocated a complete cap on the prices of gas purchased by the EU, including liquefied natural gas (LNG ). “Fifteen countries have clearly come out in favor (…), a solid majority”, welcomed Italian Minister Roberto Cingolani.

“Nothing is excluded (…) but we must be careful not to undermine the security of our supplies” during the winter, reacted Ms Simson, recalling that the EU must remain sufficiently attractive in a highly contested world market, where supply is tight and where LNG vessels can easily find other destinations.

“Under the name + gas price cap +, we can put a lot of things”, insisted the French Minister Agnès Pannier-Runacher, “whether it is LNG, gas transported by pipeline from Norway and the ‘Algeria’, or the ceiling imposed by Spain on the price of gas paid by thermal power stations.

“There are a lot of very different proposals, it’s much too early to say that we will do this or that,” German Chancellor Olaf Scholz said in Berlin on Friday.

Redistribute “superprofits”

At the heart of the debates: the dysfunctions of the European electricity market, where the wholesale price is indexed to the cost price of the last power station mobilized to meet demand – often a gas-fired power station.

The Commission proposes to cap the revenues of nuclear and renewable energy operators (wind, solar, biomass, hydroelectric) who sell their electricity at a price well above their production costs. States could levy the difference between this ceiling and the market price to redistribute these “superprofits” to vulnerable households and businesses.

Despite very different energy mixes from one country to another, the measure has generated a broad consensus. Berlin and Paris, under political pressure to tax “superprofits”, demanded such a “contribution mechanism”.

At the same time, the Commission wants to demand “a temporary solidarity contribution” from producers and distributors of gas, coal and oil, favored by the surge in prices.

After the agreement of the Twenty-Seven at the end of July to cut their gas consumption, Brussels also proposes to set “binding objectives” to reduce the demand for electricity, with a drop “of at least 10% in net monthly consumption ” and 5% during peak hours.

“As with gas, it would initially be a voluntary approach, with the possibility of moving to mandatory reductions from a level that remains to be discussed”, tempered Mr. Sikela.