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.
At least ten EU member states oppose singling out Russia for a cap on its gas prices, warning that such a move could push Russian president Vladimir Putin to cut supplies to Europe completely, the Financial Times has reported.
The EU countries opposing action against Russia, alone, including Greece, Italy and Poland, want caps on gas prices for all suppliers.
The lack of consensus on a gas price cap means that the proposal is not expected to lead to a decision at today’s emergency meeting of EU energy ministers.
“Quite frankly the Russians will probably retaliate on this,” Nikos Tsafos, chief energy adviser to Greek prime minister Kyriakos Mitsotakis, told the Financial Times.
“Europe should have a loud voice and impose a reasonable price,” said Italy’s energy transition minister Roberto Cingolani, saying he too preferred a general cap. “It is a perfect storm against our citizens and companies.”
Moscow has threatened to stop all gas supply to Europe should the EU impose a gas price cap. Russian gas supplies to the bloc have been cut by about 80 per cent to about 84mn cubic meters a day since the start of Russia’s invasion of Ukraine.
Prime Minister Kyriakos Mitsotakis will hold an emergency meeting this afternoon at the government headquarters with the energy ministry leadership’s participation following Russia’s decision yesterday to disrupt gas supply to Bulgaria, following a disruption to Poland.
The Greek leader had a telephone discussion with his Bulgarian counterpart Kiril Petkov this morning, pledging Greek energy-supply support, within the framework of EU solidarity, following Russia’s decision to disrupt supply to the neighboring Balkan country.
This support will most likely stem from Greece’s LNG terminal at Revythoussa, the islet just off Athens, through a partial reservation of this facility’s capacity for Bulgaria’s needs.
Consumption in Bulgarian at this time of the year is low, meaning supply through the Revythoussa unit should help cover the neighboring country’s needs, at least temporarily.
Bulgarian-based MET Energy has already ordered a 142,500 m3 LNG shipment through the Revythoussa terminal.
The main power utility’s prospective Ptolemaida V power station, now being developed, will most likely be eligible for CAT remuneration, the European Commission’s Permanent Representatives Committee (COREPER) has indicated.
According to the European Commission’s clean energy package, now being shaped, EU support mechanism subsidies will be reserved for units whose CO2 emissions do not exceed 550 grams per KWh. This upper limit promises to exclude units driven by fossil fuels such as carbon and lignite.
The clean energy rule is expected to soon be implemented for all new power stations and also apply for existing units as of July 1, 2025. From this date onward, units fueled by fossil fuels will no longer be valid for CAT remuneration.
Luckily for PPC’s Ptolemaida V project, the European Commission decided, in December, to offer exemptions to the rule as a result of a request made by Poland, whose economy and electricity production are heavily reliant on coal. This sets a precedent. PPC’s effort to ensure CAT remuneration for Ptolemaida V, expected to be launched in 2021, stands to benefit from the development.
Poland appears to have gained the Greek government’s support in the country’s request to the European Commission for an investigation into CO2 emission right price manipulation suspicions at energy exchanges.
Like Warsaw, the Greek government is also concerned by the rise in CO2 emission right prices, energy ministry sources have admitted.
It remains unclear if the issue was tabled at a meeting yesterday between energy minister Giorgos Stathakis and Maros Sefcovic, the European Commission’s vice president for Energy Union.
Emission right allowances could be increased if these price manipulation suspicions are confirmed, sources around Europe believe.
Poland has been particularly affected by escalating CO2 emission right prices as it a coal-dependent nation. Just weeks ago, the Polish government forwarded a request, in writing, to Brussels calling for an investigation into CO2 emission right prices. They reached 20.70 euros per ton yesterday.
Eurelectric, the European electricity industry association, intends to stop supporting investments in carbon-based electricity generation from 2020 onwards as part of its commitment to helping achieve carbon-neutral power supply in Europe by 2050, the association noted in a statement released today.
Greece and Poland, still maintaing carbon-heavy energy mixes and planning to develop new carbon-fired power stations, will not back Eurelectric on this objective.
“EURELECTRIC believes that market-based mechanisms such as carbon markets are the most cost-effective and efficient tool for mitigating greenhouse gas emissions and stimulating investments in low carbon technologies and energy efficiency,” Eurelectric noted in a statement.
The association also pointed out: “Only the combination of an effectively reformed EU ETS and improved EU electricity market design can lead to sustainable and credible carbon price signals to drive investments to mature low carbon technologies. The power sector is already widely investing into low-carbon and innovative solutions to achieve carbon-neutral electricity supply by 2050 and does not intend to invest in new-build coal-fired power plants after 2020. In this context, we strongly reiterate our belief in cost-efficiency as an essential to building a resilient and future-proof Energy Union. We therefore urge policy makers to refrain from introducing command and control tools and to support a market-based energy transition.
Antonio Mexia, president of Eurelecric and chief executive of Portugal’s EDP, noted that the electricity sector is “determined to lead the energy transition and support its commitments for a low-carbon economy through specific actions.”
Eurelectric represents 3,500 electricity sector enterprises in Europe with a total capitalization of over 200 billion euros.