European Union Member States failed to agree on EU-level measures to tackle soaring energy prices on Tuesday 26 October at an extraordinary meeting of EU energy ministers in Luxembourg.
The ministers remain divided on the possibility of grouped purchases of fossil gas and the establishment of a strategic gas reserve - two Spanish proposals - and on the need to reform the European electricity market - a proposal put forward by France.
Hostilities had already been launched the day before the meeting, with a joint statement by nine Member States (Luxembourg, Austria, Germany, Denmark, Estonia, Finland, Ireland, Latvia and the Netherlands), joined by Sweden, to express their opposition to any ad hoc reform of the wholesale electricity market (see EUROPE 12819/2).
At the meeting, the German State Secretary in the Federal Ministry of Economics and Energy, Andreas Feich, called for “not to interfere with the internal market”. “Free prices and a competitive market are the means (...) to ensure that energy remains affordable in the future”, he said.
Luxembourg Minister Claude Turmes called for a differentiation between price signals on the wholesale electricity markets and measures that Member States can take on prices for consumers.
“We must not (...) attack wholesale markets head-on”, he then insisted, referring explicitly to recent statements by French Finance Minister Bruno Le Maire (see EUROPE 12804/14).
The French minister, Emmanuelle Wargon, said she was “surprised” by the declaration of the nine Member States.
“The current functioning of the European electricity market for retail prices is clearly reaching its limits. We would like to see a wide-ranging reflection, in particular on the articulation between the upstream and downstream markets”, she stressed, recommending a "structural approach” and an “in-depth analysis”.
Supporting the French proposal, Spain’s Secretary of State for Energy, Sara Aagesen Muñoz, called for the decoupling of electricity prices by having two prices, a marginal price and an “infra-marginal” price, so that electricity prices are directly linked to the energy mixes of Member States. It also proposed to set a maximum price for gas.
For her part, Commissioner for Energy Kadri Simson recalled that the Commission has asked the European Energy Regulators (ACER) “to study the advantages and disadvantages of the current organisation of the electricity market” with a view to delivering the first results by mid-November and proposing recommendations by April 2022 (see EUROPE 12811/1).
Grouped gas purchases
At a closed-door lunch following the meeting, ministers also appeared divided on the possibility of using bulk purchases of fossil gas and establishing a strategic reserve, according to one source.
Another source told us that the proposal for joint procurement put forward by Spain is supported by Portugal, Italy, France, Hungary and Romania.
Denmark and Luxembourg, on the other hand, are rather in favour of action to optimise the EU’s gas storage capacities.
“I think we have to be reasonable, organising a complete group buying system will take years and it won’t help consumers”, said Turmes.
Asked about the issue at a pre-lunch press conference, Simson said the Commission would have to “assess the pros and cons of such a system” in the context of the gas legislative package due on 14 December, saying it was one of the options being considered to make the EU’s gas system more resilient.
She added, “There are many issues to consider - who will pay for the costs of gas supply and storage, how gas will be transported between different regions within the EU.
ETS
Another divisive issue is the EU Emissions Trading System (ETS).
For Germany, supported by Denmark, Sweden and Finland, changing the ETS “would be premature, as it works well”.
Poland, on the other hand, has long argued for a revision of the system. While Estonia agreed, Hungary, Latvia and Bulgaria were more emphatic in their opposition to the proposal to establish an ETS2 covering buildings and road transport (see EUROPE 12762/1).
Hungary, Spain, Bulgaria and Luxembourg also supported the Polish request to urgently investigate financial speculation in this system.
Although “there is no evidence (...) that speculation is a price driver in the carbon market, we have asked the European Securities and Markets Authority (ESMA) to look more closely at patterns of trading behaviour and the possible need for targeted action”, Simson said. The first preliminary assessment is expected by 15 November and the full analysis by early 2022.
Nuclear and fossil gas
Finally, it should be noted that many Member States (France, Romania, Czech Republic, Poland, the Netherlands, Bulgaria, Slovakia and Hungary) have asked the Commission to include nuclear power in its forthcoming delegated act on EU taxonomy and to present it as soon as possible. Finland, on the other hand, considered that nuclear energy can contribute to climate neutrality.
Luxembourg, Austria and Denmark, on the other hand, opposed the idea.
Poland, Hungary, Romania, the Czech Republic, Bulgaria, Slovakia, Greece, Malta and Cyprus have also called for fossil gas to be included in the act as a "transitional" energy. Italy also defended the role of natural gas.
Confirming that the delegated act will be presented before the end of the year, Commissioner Simson said that the EU will need a “stable source of energy” alongside renewables. (Original version in French by Damien Genicot)