The last piece of the puzzle to tackle the energy crisis has already given the green light from Twenty-Seven. After weeks of negotiations, the European Union’s energy ministers managed to shut it down this Monday—five days after receiving mandate from European leaders and a week after the vast majority of Spain-led countries stood up. political agreement on correction mechanism to deal with excessive price increases gas. The system will be activated when the gas price drops. exceeds 180 euros for three consecutive days The difference between the price of liquefied natural gas (LNG) per megawatt hour (MWh) and in international markets is at least 35 Euros in wholesale contracts under the Dutch TTF.
“we did our job And we have a deal. It is the most important message. At the end of a new report, another impossible task has been accomplished, and as with the movies, this last one was probably the most difficult,” said Czech minister and current chairman of the Council, Jozep Síkela. final negotiation marathon lasting more than seven hours that he fired the rest of the energy ministers by giving him a sweatshirt that he made his slogan for this term: ‘I will convene as many energy councils as necessary’. “It has been a busy day but very positive news”, underlined Teresa Ribera, third vice president and minister of ecological transition.
agreement as “effective and realisticIt was approved by the Presidency. qualified majoritywith avoid Holland Y Austria and vote against Hungary. Finally Germany approved the deal to be applied from next February 15 temporarily for one year. The mechanism will apply to contracts linked to the TTF, as well as to the rest of the European indices, but as Síkela explains, these may be unlinked. On the other hand, transactions other than market, intraday market and daily changes will be excluded.
Almost 100 Euros less
The cap reduces the European Commission’s initial bid of 275 euros per megawatt hour by almost 100 euros. It also reduces the gap with the price of liquefied natural gas in world markets, a kind of premium to ensure that LNG carriers continue to find the European market attractive. It finally stands at 35 euros, compared to 58 euros originally proposed by Brussels. “If the LNG reference price is less than 145 euros, the dynamic bid limit will remain at the sum of 145 euros and 35 euros,” the Presidency said. According to Ribera, “The fact that we are always signaling in the international markets that we are ready to pay 35 euros more than the price, Important guarantee of attractiveness of the European market“.
After the dynamic limit is activated, it will be applied for at least 20 working days. If the dynamic bid limit is less than 180 €/MWh during the last three consecutive business days, will be disabled automatically. The cap will also be automatically disabled at any time if the European Commission declares a European Union or regional supply emergency, especially in a situation where gas supply is insufficient to meet gas demand. The Energy Regulatory Cooperation Agency (ACER) will continuously monitor the markets and if it observes that a market correction event has occurred, issue a “market correction notice”.
Protection measures
The agreement includes other important measures to respond to fears of potential supply problems and market instability in Germany and other Northern European countries, such as a suspension mechanism if security risks are identified. increase in gas demand. For example, The mechanism will be suspended if gas demand increases by 15% in one month or 10% in two monthsLNG imports are significantly reduced or trading volume in TTF is significantly reduced compared to the same period last year.
“The mechanism brings benefits but also risks and measures are included in terms of liquefied natural gas, liquidity in financial markets and gas consumption,” said Commissioner Kadri Simson. ACER) and the European Securities and Markets Authority (ESMA) will have to submit a report on possible adverse effects. “The European Commission is prepared to suspend the activation of the mechanism in advance if an analysis by the ECB, ESMA and ACER shows that. risks outweigh benefits” has been warned.
Countries like Greece, Poland or Belgium have been pressuring Prague for weeks to lower the ceiling proposed by Brussels and approach 160 euros, because too high a level would make the threshold ineffective and impractical. Northern European countries were wary of the upper limit because it supply problems and redirecting gas to third countries. With the approval of the emissions cap, two other already negotiated (and agreed upon) but blocked files are unlocked: the joint gas purchases platform and the acceleration of renewable energy permits. Ribera also stressed that few countries, including Spain, Germany, Portugal and Greece, are pressing to increase their renewable energy target.