Discussion around setting an upper limit on gas prices, requested by fifteen European partners including Spain, has begun to influence EU strategy. Ahead of the informal European leaders’ summit in Prague, Community Executive President Ursula von der Leyen confirmed the plan to work with member states to reduce gas prices, limit volatility, and curb Russia’s price impact, including considering an upper limit on gas used to generate electricity. During a Ukraine-focused debate ahead of the European Parliament plenary, she stated that this option had been presented in March and could send a strong signal that the EU would not pay any excessive price for gas. (Attribution: European Commission)
Von der Leyen outlined the roadmap she intends to present to European heads of state and government in Prague. Until now, the idea of a blanket cap on all gas entering the European Union, not only Russian gas but all gas, had stalled due to concerns that it might trigger supply problems, a point historically raised by countries such as Germany and the Netherlands and echoed by the European Commission. The commission acknowledged that such a cap could disrupt supply if not carefully designed. The prevailing view remains that a cap on Russian gas is the more feasible route, while negotiations continue for the most favorable arrangements with major suppliers like Norway, the United States, and Algeria. (Attribution: European Commission)
However, in a notably ambiguous address given on Wednesday, von der Leyen spoke of a general ceiling with immediate impact on price levels, while also noting drawbacks for gas supply security. What has shifted in Germany’s stance to produce this 180-degree turn from the Commission’s March position is explained as a substantially improved situation. More member states are willing to act, and better preparedness is claimed, though details on how the cap would operate are not elaborated beyond a commitment to ensure supply security. (Attribution: European Commission)
Dutch TTF Reform
The president indicated that the ceiling should be treated as an interim measure while Twenty-Seven reforms price comparison in the Dutch TTF will replace gas as the main benchmark, given its growing reliance on liquefied natural gas. The new EU price index is intended to improve how the market functions. This element is part of the working document the Commission shared at its extraordinary energy ministers’ meeting last Friday, and responds to requests from Spain and other partners. (Attribution: European Commission)
Von der Leyen also endorsed two avenues for price control: direct dialogue and negotiations with trusted partners such as Norway and a cap on the gas price used to generate electricity. The aim is to implement what is described as an Iberian mechanism at the European level, a concept discussed as part of a broader energy market reform. The initial proposal was framed as a first step in electricity market reform expected in early 2023. Exceptional times call for exceptional measures, and the European Union is urged to act in a united manner, a sentiment echoed by the European Parliament. (Attribution: European Commission)
For example, von der Leyen has highlighted that since the Russian invasion of Ukraine, the European Union has reduced its dependence on Russian fossil fuels and equipped itself with key tools to cut imports from that country. A year earlier, the 27 member states depended on Russian gas for 40 percent of supplies; today that share stands at about 7.5 percent through pipelines. This reduction has been offset by higher liquefied natural gas imports from trusted partners such as Norway and the United States. The President also noted that the EU now relies on important tools like the obligation to replenish 90 percent of gas reserves, a common purchasing platform, and a mechanism to redistribute unexpected profits to support vulnerable consumers from energy companies. (Attribution: European Commission)