The EU’s 27 leaders participating at today’s EU summit will strive to heal divisions that have created blocs within Europe for energy crisis solutions rather than seek finalized solutions on how price levels could de-escalate.
The EU-27 will be asked to agree to European Commission proposals announced yesterday. They include collective natural gas orders for reinforced bargaining power and prevention of bidding wars by fellow EU member states for LNG quantities, as well as a supplementary gas benchmark offering a more accurate reflection of market conditions.
A Brussels request concerning a temporary price cap on gas used for electricity generation, a strategy already adopted by Spain and Portugal, is expected to be contested by the EU leaders.
Brussels considers the proposal for a price cap on gas used for electricity production should be further examined, judging by European Commission president Ursula von der Leyen’s comments in European Parliament yesterday.
France, using minimal amounts of gas for electricity generation as a result of its considerable nuclear capacity, has expressed support for such a plan. Germany accepts it but Greece, Italy, Belgium and other EU member states object as a result of the significant fiscal cost entailed.
Some EU members favoring a general price cap on gas, including Greece and, more recently, the Netherlands, are expected to remain adamant on their preferred approach at today’s summit.
Germany strongly opposes a general price cap on gas, fearing it will repel gas suppliers and push up prices as a result of reduced supply and higher demand.
A mild winter ahead appears to be the only cost-containment hope left for European consumers following yesterday’s failure by the EU’s 27 energy ministers to reach an agreement on an adjustable gas price cap or some other drastic measure that could ease the pressure of the energy crisis.
Yesterday’s impasse greatly diminishes the possibility of an agreement at the forthcoming EU summit, a two-day meeting scheduled for October 20 and 21.
However, officials will continue making efforts ahead of next week’s EU summit. The European Commissioner for Energy Kadri Simson, reacting to yesterday’s failure by EU energy ministers to reach an agreement, said talks for a solution would carry on over the weekend.
Greece, along with Belgium, Italy and Poland, have been the most supportive of a gas price cap.
German and Dutch resistance appeared to have softened in recent days, seemingly bridging the gap between the EU’s two opposing sides for and against the measure. But German officials, citing an inability for agreement within their own ranks, informed Greek officials that a gas price cap agreement is not on the cards.
Today’s extraordinary meeting of EU energy ministers in Prague, their third informal session since early September, appears unlikely to produce agreements on unresolved issues, including a decision for a temporary price cap on gas.
Participants have remained subdued ahead of this latest session, which is indicative of the lack of progress. The feared stagnancy is believed to have prompted officials to seriously consider a fourth extraordinary meeting of EU energy ministers – since early September – ahead of the next EU summit, scheduled for October 20.
This all essentially means that serious energy-crisis disagreements continue to divide the EU’s 27 member states, despite the fact that many leaders claimed positive steps were taken at last Friday’s informal summit.
The seemingly fruitless situation has been confirmed by sources associated with European Commissioner for Energy Kadri Simson and further backed by the absence of any announcement.
Disagreement over an adjustable price cap on gas is the main dispute. The proposal will be further discussed today by the EU’s energy ministers. Greece and four other EU member states, Belgium, Italy, Poland and Spain, are the most supportive members of the plan.
Though no gas price-cap decision is expected at today’s informal EU meeting of heads of state, participants will be expected to establish the basis for a political agreement at the European Council meeting on October 20.
All eyes are on Germany following a significant step taken by the European Commission to adopt a proposal forwarded by 15 EU member states supporting a price cap on gas. The German government now appears to the considering the proposal but an agreement is not yet guaranteed.
If Berlin is to accept the gas price cap proposal, assurances will be needed on how the risk of LNG shipments straying to Asian markets – where buyers appear willing to offer whatever sums are necessary to secure shipments, instead of staying in Europe – may be eliminated.
Another issue the German government would want addressed to offer its consent concerns how a rise in gas demand, as a result of lower prices, can be prevented.
Disagreement between Berlin and other EU member states on a gas price cap has now somewhat softened. The matter is gradually shifting away from the political sphere and closer to market reality.
Greece, Belgium, Italy, Poland and Spain, the five EU member states most supportive of a price cap on natural gas, represent the nucleus of the 15 member states calling for a gas price cap and are working feverishly on a flexible proposal to be forwarded to the European Commission as soon as possible.
The German government now appears to be considering an EU proposal for a price cap on gas ahead of tomorrow’s informal EU meeting of heads of state, but Berlin’s acceptance of such an initiative would be conditional, requiring a compulsory and significant reduction in gas consumption levels throughout the EU.
Germany’s Vice Chancellor Robert Habeck, who heads the country’s energy portfolio, set this condition during a meeting yesterday with the energy ministers of Greece, Belgium, Italy, Poland and Spain, representing the five EU member states most supportive of a price cap on natural gas.
The European Commission’s recent proposal for an optional reduction in gas consumption would need to be made compulsory if Berlin is to accept a price cap on gas, Habeck told the five energy ministers, according to sources.
Despite Germany’s softer stance, work is still needed if a price cap on gas is to be implemented. An official decision cannot be reached at tomorrow’s EU meeting of heads of state as it is an informal session.
It will be followed by another informal meeting in Prague next Tuesday between the EU’s energy ministers.
Brussels is also working on the establishment of a new benchmark for natural gas that better reflects Europe’s new energy reality in which LNG, not pipeline gas, is now the dominant gas source.
The energy ministers of Greece, Belgium, Italy, Poland and Spain, representing the five EU member states most supportive of a price cap on natural gas, are scheduled to stage a teleconference with their German counterpart Robert Habeck today to analyze their price-cap proposal in an effort to overcome Germany’s resistance.
Berlin’s opposition to a European gas price cap and unilateral announcement of a 200 billion-euro national package for the energy crisis have disappointed many European governments, going into an informal EU meeting of heads of state this Friday with little hope of bold decisions.
EU member states are generally feeling increasingly frustrated by Germany’s refusal to back a collective European decision for the energy crisis, a stance Berlin will not be able to keep justifying.
According to sources, the group of five’s gas price cap proposal is set at a level that would ensure gas suppliers do not turn their backs on Europe and send their tankers to markets in Asia, where demand is set to rise in the lead-up to winter.
To guarantee supply to Europe, the continent’s price cap level will need to be set slightly higher than price levels at Asian energy exchanges.
Offshore wind farms have tremendous potential for development in the Greek market, and could be a game changer, Panagiotis Ladakakos, president of ELETAEN, the Greek Wind Energy Association, has told an industry event.
Floating offshore wind farms are a better option for Greece than fixed-bottom offshore wind farms as a result of the country’s great sea depths, which would increase the installation difficulties of fixed-bottom units, event participants agreed.
The ELETAEN president proposed the establishment of a framework offering a clear and detailed road map, adding that targets should be set for the next decade and beyond, all the way to 2050.
RES spatial map revisions incorporating Greece’s sea territory, as well as an action plan for the development of needed infrastructure concerning ports, shipyards and the supply chain are also needed, the ELETAEN president noted.
He added that power grid operator IPTO must take initiatives to plan sea transmission hubs for offshore wind farms, as this technology’s growth also depends on network development.
A pilot competitive procedure for a large-scale offshore wind farm project or projects would serve as a catalyst, the ELETAEN president added.
Greece’s potential in this sector was also highlighted by Francois Van Leeuw, co-CEO of Belgium’s ParkWind, one of a number of Belgium companies that participated in the event, staged as part of a three-day official visit to Greece by Belgium’s King Philippe and Queen Mathilde.
Greatly increased renewable energy contributions – covering over 80 percent of demand – during yesterday’s weekend siesta hours of 2pm to 5pm pushed down the wholesale electricity price to virtually zero, or 0.09 euros per MWh.
RES input reached approximately 5 GW (wind and solar energy units), while demand was limited to just over 6 GW, enabling authorities to withdraw from the market lignite and gas-fired power stations.
On the same day, when RES input eventually fell and gas-fired power station contributions were brought back into the grid, the electricity price level rebounded to 283 euros per MWh by the evening.
The wholesale electricity price averaged 168.22 euros per MWh on Sunday, a 27 percent reduction compared to Saturday.
Similar price fluctuations were also recorded in other parts of Europe over the weekend. Negative prices were recorded in Germany and the Netherlands, at -2.49 euros per MWh, and they were even lower in Belgium, at -17.97 euros per MWh. These negative prices essentially mean that consumers are paid to use electricity.
Today, electricity market conditions are back to the ongoing energy crisis’ normal levels. The average wholesale electricity price is at 243.08 euros per MWh, up 44.5 percent compared to yesterday, despite RES input representing 51.1 percent of the energy mix.
A series of unfavorable developments, including nuclear reactor withdrawals in Germany and Belgium, persistently high natural gas prices and strong energy demand threaten will further test the European grid, threatening to prolong the energy crisis.
The withdrawal of nuclear reactors in Germany and Belgium, combined with skyrocketing natural gas prices, will negatively impact Europe’s electricity market, even in countries where natural gas holds a small share of the energy mix, as markets are interconnected, enabling a knock-on effect.
Germany has announced a withdrawal, today, of nuclear reactors with a combined capacity of 4.25 GW and remaining capacities, totaling about 4.3 GW, by end-2022. Overall, this phase-out represents 12 percent of the country’s electricity supply.
In addition, Germany’s new coalition intends to reassess the country’s existing decarbonization plan, its phase-out of fossil-fuel plants running until 2038, with the aim of shortening this procedure t0 2030, if possible.
Belgium is headed in the same direction. The country’s nuclear reactor phase-out runs until 2025. The country’s Doel 3 facility is planned to shut down in October, 2022, followed by Tihange 2 in early 2023.
Electricity demand in ten European countries is forecast to increase by 2 percent, or 5 GW, on average, in 2022, according to a Platts Analytics projection.