The European Commission indicated that this Monday it is preparing an urgent intervention action to try to curb the price of electricity in Europe, where energy futures contracts to be delivered in 2023 have already reached 1,000 euros per MW hour in some countries.
The signal was given by the president of the Commission, Ursula von der Leyen, during a speech at the strategic summit taking place in Bled, Slovenia.
“The rebound in electricity prices is exposing, for different reasons, the limitations of the current design of our market, which was developed under completely different circumstances and with different objectives. That is why we are working on an emergency intervention and a structural reform of the electricity market”.
We need new strategic thinking to defend the rules-based order. Must:
• Neutralize Russia’s blackmailing power, strengthen our ability to act⁰
• Support democracies most exposed to foreign threats• Use our economic might to preserve and expand the rules-based order pic.twitter.com/rjkRuEpXSo
– Ursula von der Leyen (@vonderleyen) August 29, 2022
More and more countries are asking Brussels to allow or introduce a cap on wholesale market prices and the Czech Republic, which holds the presidency of the European Union, has called an extraordinary meeting of energy ministers for the next 9th of September.
EU Energy Ministers meet in Extraordinary Council on September 9
The model of this intervention is still being developed, but European diplomatic sources quoted by the Bloomberg agency admit that Brussels could reveal more details this week. A scenario that has already been considered internally is to introduce a cap on the price of gas, whose shortage caused by the interruption of Russian shipments has been identified as the main cause of the rise in the price of electricity.
In fact, it was this limit that Portugal and Spain negotiated with the European Commission in the first half of the year that resulted in the adoption for one year of the Iberian mechanism that disconnects the price of gas from the price of electricity. This solution was accepted after a long negotiation in which the two governments discussed the thesis of the energy island to underline the reduced interconnection of electricity and gas with the rest of Europe.
In addition to an extraordinary and emergency measure, Brussels is also working on the reform of the structure of the electricity market that works under a marginalist logic whereby the technology with the highest marginal cost that enters sets the price of all the energy sold at the same time. In recent months, also due to the drought experienced in several European countries, this energy has been natural gas for more and more hours.
The initiative to intervene in the formation of prices in the electricity market – a principle that Brussels has always rejected in the past – has already been well received by the German chancellor. “We are going to look very closely at the instruments that we can use to lower the price of electricity. It is not something that can happen by chance, it has to be effective from a technical point of view, but it is obvious that what is happening now is not a real reflection of supply and demand”, said Olaf Scholz.
The German official reacted in Prague after a meeting with Czech Prime Minister Petr Fiala, who also admitted to journalists that the way forward is to disconnect the price of electricity from the price of gas. The Czech Trade Minister, Jozef Sikela, also revealed that the introduction of a ceiling on natural gas used in electricity generation is being considered, which corresponds to the solution put in place by the Iberian mechanism.
The acting EU president also admitted reopening the issue of the cost of CO2 emissions, which is putting an even heavier burden on natural gas at a time when European demand for alternative sources to Russia is on fire, to fill reservations for the winter. even more so the already very expensive international prices.
Source: Observadora
