Turkey’s energy ministers European Union They managed to accomplish a new “impossible task”. This is how Jozef Síkela, president of the Czech Republic, which holds the rotating presidency of the European Union, announced at the tenth second Energy Council the agreement setting a maximum price of 180 euros per megawatt hour for gas in Europe. this year. In this case with With the new agreement, it is possible to give a signal to the markets as to what the maximum price is. In the words of the third vice-president and minister for Ecological Transition, Europe is ready to pay for gas, Teresa Ribera. And once again, consensus was reached, although it wasn’t easy. There is two clear messages : Europe will not accept offers to buy gasoline above 180 euros per megawatt hour and if that happens, the price to be paid will be more than 35 Euros per megawatt-hour in international markets. But they will also settle many protections in order to be able to quickly cancel the mechanism. These are some keys
how the mechanism works
To begin with, this mechanism will not be able to work so far: February 15, 2023. Required from then two conditions to enable: this three days in a row The reference market price for gas in Europe (Dutch TTF) reaches 180 euros per megawatt-hour also, the reference price in global liquefied natural gas (LNG) markets exceeds 35 euros per megawatt-hour. These conditions occurred only in August and September of this year. Then the mechanism will kick in and in which question will the “” be? dynamic price limit” It consists of the list price of global LNG markets to which 35 Euros per megawatt-hour will be added. This dynamic price It will be automatically disabled when global LNG prices drop below 145 euro megawatt-hours for three consecutive days. (ie 180-35 euros per megawatt-hour).
Differences with the Brussels proposal
This the main difference With the European proposal, this is a dynamic price (international bid price + 35 euros per megawatt-hour) and not a fixed price as the European Commission recommends. This has been one of the main installations in Spain: “To give a sign that we are, Ready to pay another 35 euros third vice-president and minister for European Transition, argued that “international markets are a major attraction” Teresa Ribera On leaving the council.
But also Conditions for activation changed, but in this case less than spain would like . Thus, the proposal prepared by the curator kadri simsoncia established for the implementation of the mechanism where the gas price reaches 275 euros per megawatt-hour for 10 days, with a difference of 58 euros per megawatt-hour compared to global prices. has never happened before. government Pedro Sanchez He favored direct implementation of the mechanism, without any barriers to entry, but ” many Member Statesyou need this when executing this exception be tied to a price This is the difference between a “price orientation” mechanism that Spain seeks and an “ultra-security” mechanism like the one that was finally adopted.
Measures to avoid a supply crisis
“We installed a lot of things if we found that it wasn’t working. suspension provisions “Germany’s energy minister said, Robert Habeck , leaving the meeting. Although the country finally signed the treaty (only Hungary opposed it, and Austria and the Netherlands abstained), it was one of the most reticent against the treaty. Fear of the Olaf Scholz government, avoiding the price crisis one is created supply crisis.In other words, producing countries decide to stop gas supply to Europe by setting a ‘maximum’ price for gas and do it to other countries. “The Commission has always been very clear that this mechanism has risks as well as benefits. Additional safeguards have been established regarding liquefied natural gas supply, liquidity of financial markets and gas consumption. In particular, we have stricter provisions. Energy Commissioner, significant increase in margins “In case of a reduction in derivatives transactions or shifting of transactions outside the European Union,” he said. kadri simson, this Monday. In fact, the EC requested a report from the European Securities Market Authority (ESMA) and the European energy regulator (ACER) on January 23 and then January 1 before the mechanism took action. the practice may be “stopped” if they “show that the risks are greater than the benefits”.
How does it affect Spain?
Although the impact in Spain was previously limited as the gas price in the Iberian market (Mibgas) has been disconnected from the European reference (TTF) for months due to the capacity of the Iberian Peninsula, its effects remain known. it will supply itself with liquefied natural gas and will be less dependent on Russia. However, gas buyers with contracts tied to the European market will ensure that prices do not differ much from international markets. These effects gas receivers like gas companies and big industry, but also electricity market, As in the case of Spain intervened with the so-called ‘Iberian exception’.
“The Iberian exception is valid until the end of May and separates gas price from electricity price . In this case, it is a signal to the source of the problem, the gas price that applies to the electricity price, and also to the industry when it needs to use gas for its production. .If we say that offers above a certain threshold (40 Euros per megawatt-hour) are not accepted, you also cannot pay the natural gas bill over 180 Euros.” This upper limit, which will increase the price above 35 Euros, will come into effect.