On Wednesday 13 October, the European Commission unveiled its “toolbox” to help EU Member States mitigate the negative impact of soaring energy prices on households and businesses.
As expected, the communication lists a series of possible measures for the short and medium term.
Adapted and adjustable national measures in the short term
In terms of immediate response, the European Commission recommends “tailored measures that can quickly mitigate the effects on vulnerable groups, be easily adjusted when the situation improves, and avoid interfering with market dynamics or weakening incentives for the transition to a decarbonised economy”.
So far, six Member States have informed the European Commission that they have taken national measures, while 14 others have expressed their intention to do so, the institution said.
The national measures listed in the toolkit include: - emergency income support (vouchers or partial bill payments) for consumers in fuel poverty; - temporary deferral of bill payments; - temporary and targeted tax rate reductions for vulnerable households; - aid to companies or industries in accordance with EU State aid rules; - accompanying measures to support renewable electricity purchase agreements and facilitate wider access to them; - safeguards to avoid network disconnections.
While the European Commission has re-emphasised the minor role of the increase in carbon prices on the increase in electricity prices (the effect of the gas price increase on the electricity price is nine times greater than the effect of the carbon price increase), it intends to ask the European Securities and Markets Authority (ESMA) to strengthen its monitoring of the development of the European carbon market.
“We are currently investigating as a matter of priority all allegations of possible anticompetitive commercial conduct by market participants”, Commissioner for Energy Kadri Simson further assured in response to a journalist’s question.
The institution will also “investigate possible anti-competitive behaviour in the energy market” and call on Member States and energy regulators to consider how best to protect vulnerable consumers.
Group purchase of gas under study
In the medium term, the European Commission is considering revising the EU Security of Supply Regulation (2017/1938) to “ensure better use and functioning of gas storage in Europe”. This initiative would be part of the review of the third gas package, scheduled for 14 December (provisional date).
The level of gas storage in the EU is currently 76% of maximum capacity, which corresponds to 20% of the annual gas demand in the EU, according to the European Commission.
Although this level is below the 90% average of the last ten years, the institution is not panicking. The “winter outlook” published by the ‘European Network of Transmission System Operators for Gas’ (ENTSO-G) on 12 October shows that the European gas infrastructure offers sufficient flexibility to the market during the winter, it stressed, while assuring that the situation is being closely monitored.
While Spain had argued for pooled gas purchases along the lines of joint purchases of Covid-19 vaccines (see EUROPE 12806/6), the European Commission also plans to study “the potential benefits of voluntary joint purchasing of gas stocks by Member States”.
According to Thomas Pellerin-Carlin, Director of the Energy Centre of the Jacques Delors Institute, this would be a useful measure, as “it would make it possible to limit the seriousness of future crises that could occur in gas prices, for geopolitical reasons, for example”. “But it is by no means a miracle solution”, he later tempered in an online press briefing organised by the European Climate Foundation.
He believes that the European Commission should propose measures to ban the sale of fossil-fuelled residential water heaters from 2025 and to develop renewable heat production.
European Commission defends energy market
The European Commission also re-emphasised the importance of implementing the ‘European Green Deal’ to develop renewable energy and thus strengthen the EU’s energy independence while promoting the benefits of the European energy market.
It does not seem to be thrilled by the request of some EU countries, led by France, to revise this market, which operates on the basis of a ‘marginal price’ system.
Under this system, the last power plant needed to meet consumer demand sets the overall price for all power producers. However, at times of peak demand, this is often a gas or coal-fired power station.
France, which has many nuclear power plants to produce its electricity, wants to decouple the price of electricity from that of gas (see EUROPE 12805/11).
However, for the European Commission, “it is unlikely that alternative market models will produce better results”, as “price spikes are driven by global conditions”.
However, it will ask the European Energy Regulators (ACER) “to study the benefits and drawbacks of the existing electricity market design” and to propose recommendations by April 2022. “I will liaise with ACER to obtain preliminary findings by mid-November to inform discussions with energy ministers”, Mrs Simson said.
Asked by EUROPE about the benefits of the French proposal, Andreas Rüdinger, a research associate at the Institute for Sustainable Development and International Relations (IDDRI), first stressed that it is “clearly not a solution to the current crisis”, since “reforming the energy market will take years”.
In his view, there is no credible alternative to operating by merit order and marginal costs at the moment, and no interest for France or Europe in limiting market integration.
“We can debate a reform of the architecture of the electricity market in Europe, but this debate cannot start from a reading of the current crisis as seen through a national prism, but rather from the issues related to the low-carbon transition in Europe: which market architecture for a decarbonised electricity mix in which renewable energies provide the major part of production?”, he added.
The European Commission also intends to establish new “transnational regional risk groups” for gas supply. They will be responsible for analysing the risks for the next four years and advising Member States on the design of their national prevention and emergency action plans. They will also assess the possibility of concluding joint voluntary regional storage agreements.
Finally, the European Commission recalled that it intends to propose a regulation on cybersecurity for electricity as well as an EU Council recommendation by December 2021, to provide further guidance to Member States on how best to address the social and labour aspects of the green transition.
Next steps
The issue of soaring energy prices will be discussed by the 27 Heads of State or Government of the Member States at the European Council on 21 and 22 October.
An extraordinary meeting of the Member States’ energy ministers to discuss the European Commission’s “toolbox” is also scheduled for 26 October, we were told after the meeting of the Member States’ ambassadors to the EU (Coreper).
According to market forecasts, wholesale gas prices are expected to remain high over the winter and to decrease by April 2022, the European Commission said. Prices would nevertheless remain above the average of recent years.
See the “toolbox”: https://bit.ly/3lywDpA (Original version in French by Damien Genicot)