High energy prices in Europe remain the industry’s main concern. The European Commission is well aware of this and hopes to encourage European leaders to think again at the Summit on 19 and 20 March, as it indicated to Alden-Biesen at the beginning of February (see EUROPE 13807/2).
The war in Iran, and its impact on world oil and gas markets, has only served to heighten concerns (see EUROPE 13819/2).
On Friday 6 March, the European Commission launched its first internal discussion session as part of a policy debate by the college of Commissioners that was specifically devoted to the issue of energy prices.
European electricity market and ETS. At the heart of the current debate—as was the case in 2022, at the height of the energy crisis—is the questioning of the ‘merit order’ system for setting electricity prices. It ranks the means of electricity production from the least expensive to the most expensive, starting with renewable sources and generally ending up with gas, in the event of high demand, setting the final price.
In a letter sent to the European Commission on Thursday 5 March, seven Member States, including Denmark, Sweden and the Netherlands, called on the Commission not to interfere with this system since it is the cornerstone of the electricity market, also asking them not to undermine investor confidence.
The other major issue on the table, which has been singled out by heavy industry, is the EU Emissions Trading System (ETS), which requires companies to buy ‘permits’ in order to emit CO2.
A review of the system, which was launched in 2005, is expected soon and some major countries, such as Germany and Italy, see this as an opportunity to shake things up.
Security of supply. With the war in the Middle East triggered by attacks by the United States and Israel in Iran on 28 February, energy markets remain volatile and fears about security of supply are intensifying, despite the reassuring tone adopted by the European Commission.
The day before, on Thursday 5 March, it convened a meeting of the Energy Union Task Force (EUTF), which confirmed that no immediate risk to security of supply had been observed, in line with the conclusions of the Oil & Gas Coordination Group meetings of 4 March.
On the international front, the Executive Director of the International Energy Agency, Fatih Birol, who took part in the College’s policy debate on Friday, reiterated that there was no shortage of oil but that the world was facing “a temporary logistical disruption”.
They went on to say that no collective action was currently planned to release oil stocks. EU countries are required to maintain stocks equivalent to at least 90 days of average daily imports in the event of an emergency.
Domestic renewables and nuclear power. The disruption to global oil and gas flows as a result of the conflict in Iran is also rekindling discussions between EU Member States on the development of new domestic capacity for renewable and nuclear generation.
In a letter to the European Commission sent on 4 March, Sweden called for tougher conditions for investment in so-called ‘baseload’ energy, which is non-intermittent and independent of weather conditions. It also called for specific targets to be set for electrification and the adequacy of resources.
This is an approach that is also supported by Fatih Birol, who felt that it was in the interests of the security and sovereignty of European countries to “further develop their renewable energies (...) and to initiate a strong return of nuclear energy”. (Original version in French by Pauline Denys)