Brussels’ reluctance to make decisions gas price cap The imports of the European Union from third countries, both by pipeline and by ship, have not disappeared. Despite open demand and mounting pressure from at least 15 member states, the European Commission is reluctant to move in this direction and sees the measure as “radical, highly complex and fraught with supply risks”. Alternatives: extending the Iberian exemption model to other European partners to cap the price of Russian gas imports, negotiate better prices with reliable suppliers, and limit the price of gas used to generate electricity.
All these ideas will be on the table this Friday on a new day. extraordinary meeting of ministers energy – the second of this month – urged to approve the first measures electricity market intervention: 10% reduction in recommended consumption on average plus 5% mandatory during peak hours, a cap of 180 €/MWh for revenue from marginal technologies such as renewable energy, and temporary and solidarity contribution from oil and gas companies (33% of their extraordinary profits) . Negotiated in a record two weeks, the arrangement gives Member States flexibility to implement the alleged savings as they see fit, and allows governments to maintain national measures if they are equivalent; The Spanish or Iberian exception is in effect until the end of May.
Immediate intervention of the electricity market, however, does not solve the big problem. high gas prices and market volatility. A debate that Brussels started this Friday work certificate with some clues but the lack of certainty and concrete suggestions in many European capitals has been disappointed. “No suggestions. It falls short, ”complain diplomatic sources. “I hope the European Commission will listen to the ministers and the proposals available from here,” said another senior official, warning of rising tensions between governments due to the lack of response.
gas price cap
The proposal to limit the price of imported gas is not among the options the European Commission has considered, despite the express request of 15 of 27 countries, including Spain, Portugal and Italy, in a letter sent this week. On the contrary, the document circulated by Brussels insists on presenting this option as a bad, complex and difficult idea, because “restricting wholesale prices on all intra-community exchanges would require, among other things, replacing the market with a centralized system. gas allocation and rationing and financing the difference between the maximum price and the global market price” is specified in the document. “Countries are getting increasingly nervous that the European Commission will not react,” European sources said three weeks ago, about a measure requested at the previous extraordinary council but sparking resistance in northern European countries as well. Like Germany or the Netherlands, which think that if the EU has to reduce demand, it can threaten security of supply and increase consumption. “We buy gas from non-European countries and the liquefied natural gas market is a global one, so there may be a supply problem. We are also a reliable partner. It would be very rare to decide on a unilateral price ceiling for gas. This is not the way to do business,” diplomatic sources warn.
Russian gas price cap
Brussels reiterates the notion that Russia is not a reliable partner, as Russia changed the terms of the contract, stopped gas supplies to more than a dozen countries, and cut off supply via the Nordstream 1 gas pipeline. . I firmly believe that we need a certain level of price cap for all Russian gas imports. Exporting to Europe remains attractive for them”, protects energy commissioner Kadri Simson. The Commission justifies this line of action as it thinks it will have an effect in reducing Russia’s ability to manipulate the European market, helping to lower prices and revenue to finance the Kremlin’s war in Ukraine.
Negotiate prices with trusted suppliers
Brussels advocates negotiation before considering caps on price, “within a reasonable time”, better conditions for gas imports via pipeline and liquefied natural gas with reliable partners such as Norway or Algeria. “While the preferred option is a mutually agreed approach with trusted partners, the EU’s main objective is to guarantee lower prices for EU consumers this winter. Therefore, the EU should be willing to take measures to limit prices”, the Commission said, starting from the idea that they should be treated as prices. “A different way to Russia”, Commission resources are noteworthy. The same sources said, “We think it will be of mutual interest and that it can respond to two-thirds of the supply.”
LNG market intervention
The Commission also proposes to intervene in the liquefied natural gas market by negotiating better prices with suppliers and developing a new index for transactions. Dutch TTFUsed as a reference by European operators “It is subject to extreme volatility and Does not capture all the dynamics of the LNG market”, protect community technicians.
Iberian exception for Europe
Taking into account experience, Brussels is also proposing for the first time the implementation of a mechanism similar to the ‘Iberian exception’ at the European level, through “a European provisional framework to limit the impact of high gas prices on the formation of electricity prices”. Some partners such as Spain, Portugal or Greece and without increasing gas consumption. One option would be to limit the price of gas in electricity generation to a level that would help reduce electricity prices. “The cost differential between the capped price and the market price will be recognized by the electricity system in Member States.”, points out to the Commission a system that they have until now excluded “Europeanization” due to the different characteristics of the markets, but now they propose. “We need something that has an immediate impact on prices. It is something that is simple, temporary, and applicable, and what we propose can be implemented and have an impact,” they explain.