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.
Greek energy minister Kostas Skrekas, taking part in an emergency meeting of EU energy ministers this Friday, will propose the establishment of a European fund to counter consequences of any future energy crises, as well as a general price cap on natural gas for all exporters, the latter proposal supported by Greece and three other member states.
A European fund for future energy crises could be designed to help protect European households and businesses from future price explosions, the proposal’s backers will support.
This fund’s structure and principles could be based on a Greek risk compensation mechanism announced by Skrekas, the country’s energy minister, in late August.
The Greek mechanism is now ready to be implemented following revisions to the public service compensation system, taking effect October, to generate increased revenues for energy crisis tools.
Financial sources for the European fund proposal have yet to be specified by Greece and the proposal’s three other backers. The money needed for this fund could stem from a low-interest European Investment Bank loan, carbon emission rights, as well as leftover Recovery and Resilience Facility (RRF) amounts.
European renewable energy associations SolarPower Europe and WindEurope have expressed their opposition to any moves by the European Commission for a lower maximum electricity price on renewables than on fossil fuel energy, noting this would endanger the energy transition.
EU member state energy ministers are meeting today in search of emergency measures to protect bill payers.
Speaking earlier this week, European Commission president Ursula von der Leyen announced the EU executive’s desire to cap wholesale electricity prices as separate measures for low-carbon and fossil fuel generators.
Von der Leyen set out revenue limits for renewables and nuclear power companies as the second of five energy crisis measures put forward by the commission, with a similar move for fossil fuel companies labeled the third measure.
This implies that the proposed income ceilings could be set at different levels for low-carbon and conventional power generators. That prospect was opposed by SolarPower Europe, which called for any limit on energy company revenue to be applied “after market clearing.”
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.
The European Commission, in search for solutions to ease the effects of the energy crisis on the EU, is likely to soon introduce a cap on gas intended for electricity generation, based on a model implemented in Spain and Portugal, as well as a windfall tax on extraordinary gains achieved by vertically integrated electricity producers, an initiative already taken by Greece.
Brussels authorities are also looking to greatly revise the structure of the target model and possibly introduce a common European funding tool, but these two plans are expected to take longer to prepare and implement.
Officials of a number of EU member states have contacted Greek authorities to enquire about details concerning the windfall tax, withholding excess revenues of electricity producers in the domestic wholesale market through a temporary mechanism that results in a partial return of day-ahead market revenues.
Member states are mostly interested to know if this mechanism has led to any side effects in Greece’s day-ahead market.
Many member state officials find the Greek model appealing as it results in an immediate disconnection of electricity prices from the price of natural gas without the need for any target model changes.
A price-cap mechanism for electricity producer payments is set to be launched this Friday and is expected to generate approximately 580 million euros for the Energy Transition Fund in July, a sum to be utilized for subsidizing consumer electricity bills.
Of this sum, 150 million euros will be derived from natural gas and lignite-fired power stations as well as power utility PPC’s hydropower facilities, while the other 380 million euros will stem from the RES sector.
Most of July’s funds to be provided by the RES sector will not be newly generated money as RES units had already refunded money to the RES special account and its surpluses were then injected into the Energy Transition Fund. Under the new system, these amounts will be directly injected into the Energy Transition Fund.
Through the new mechanism, PPC’s hydropower facilities will be paid 112 euros per MWh and all RES units will be remunerated at a rate of 85 euros per MWh. The remuneration rates for natural gas and lignite-fueled power stations will be determined every month based on a series of factors. For the mechanism’s first month, natural gas-fueled power stations will receive 253.99 euros per MWh for their output and lignite-fired power stations will receive 206.72 euros per MWh.