price caps

Factories closed as a result of high energy costs, PPAs urgently needed

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A ministerial decision exempting power purchase agreements (PPAs) from a wholesale electricity market cap, a revision that would help resolve major energy-cost issues faced by the industrial sector, is expected to be signed by February 1, according to sources.

Industrial players, concerned about certain factors regarding this revision, have expressed uncertainty as to whether the ministerial decision, alone, will suffice for the exemption to be implemented or whether a legislative revision, needing more time, will also be needed. At present, a number of factories remain closed as a result of high energy costs.

Industrialists also want clarification on whether any intervention concerning operations at the energy exchange will be needed before PPAs can be exempted from the wholesale electricity market cap. If so, this would delay the revision’s implementation by a further four months, at least. Such a delay would prove devastating for industrial units, battling to deal with high energy costs.

Factories currently closed will remain shut until at least January 15. Their owners have yet to decide if they will reopen in the ensuing period. Industries that are still operating are being supplied electricity at regular wholesale prices, negatively impacting their production costs and competitiveness.

January power subsidies at €840m, double December sum

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The government’s electricity subsidies support program for January will reach 840 million euros, energy minister Kostas Skrekas has announced, double the amount needed for December as a result of higher retail electricity prices just announced by suppliers for next month.

Recently introduced rules require electricity suppliers to announce their prices for each forthcoming month by the 20th of the preceding month.

A much-delayed European gas price cap agreement reached this week by the the EU’s energy ministers comes as a significant measure but could have offered even greater benefits for consumers had it been reached sooner, the Greek energy minister noted.

He highlighted Greece’s role in helping push the EU towards a gas price agreement, officially requested by Greek Prime Minister Kyriakos Mitsotakis in a letter to European Commission President Ursula von der Leyen.

Greece was one of several EU members in favor of a low-level gas price cap. EU energy ministers agreed to trigger a cap if prices exceed 180 euros per MWh for three days at the Dutch TTF index, which serves as the European benchmark.

Monthly residential power consumption of up to 500 KWh, a category applicable to 90 percent of the country’s households, will be subsidized at a rate of 330 euros per MWh.

 

 

Gas prices down after EU price cap agreement, big test in spring

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Natural gas prices are on a downward trajectory, confirming projections that an EU gas price cap agreement, reached earlier this week, would help contain international prices.

Yesterday, wholesale gas prices dropped to below 100 euros per MWh for the first time in months, ending the day at 97.752 euros per MWh. During trading today, the price level has dropped as low as 96.325 euros per MWh.

Though the gas price cap appears to be having a calming affect on international gas prices for now, the mechanism is expected to face a tougher test in spring, when gas demand will be greater as EU member states move to refill storage facilities following winter.

EU energy ministers agreed to trigger a cap if prices exceed 180 euros per MWh for three days at the Dutch TTF index, which serves as the European benchmark.

 

EU gas price cap agreement sends firm message to markets

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The EU’s gas price cap agreement yesterday, achieved following months of deliberation, comes as a major European step that offers energy-cost protection to households and businesses, while also sending a strong message to markets that natural gas purchases will not be made at any price.

EU energy ministers agreed to trigger a cap if natural gas prices exceed 180 euros per MWh for three days at the Dutch TTF index, which serves as the European benchmark. The cap could serve as a crucial tool against any future price surge, as was the case last summer.

Gas price levels are not expected to fall immediately. Even so, the TTF index did drop to 107 euros per MWh yesterday, following the EU’s gas price cap agreement.

It is impossible to predict whether the price cap will prove effective enough to contain gas prices below 100 euros per MWh on a permanent basis and level out wild price fluctuations swinging over 30 euros per MWh in a single day.

Also, it remains to be seen how individual market players will respond if demand increases and gas prices escalate to levels near 180 euros per MWh in the months ahead. If they please, buyers and sellers could establish bilateral agreements above the price cap level, essentially nullifying it.

 

 

EU gas price cap agreement to also propel other measures

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A gas price cap agreement reached at yesterday’s Energy Council also promises to propel a series of significant energy-sector measures such as collective gas purchases, solidarity mechanisms, a new benchmark and fast-track procedures for renewable energy units in the EU.

EU energy ministers agreed to trigger a cap if prices exceed 180 euros per MWh for three days at the Dutch TTF index, which serves as the European benchmark.

Member states that have supported the lower-level gas price cap agreed to, including Greece, wanted the series of measures incorporated as one package alongside the gas price cap. These measures are expected to be shaped and implemented swiftly in order to protect the EU’s natural gas supply security and contain natural gas price levels.

The European Commission has proposed collective gas purchases representing at least 15 percent of the EU’s gas storage capacity, the intention being to bolster the bloc’s negotiating power.

The Brussels measures also call for improved solidarity mechanisms to counter any possible supply shortages; the establishment of a new LNG pricing index by March, 2023, as an alternative benchmark to the TTF; as well as prioritizing RES projects and simplifying green energy licensing procedures to reinforce Europe’s energy independence.

Gas price cap decisions at today’s Energy Council

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A Czech EU presidency proposal for a gas price cap of 188 euros per MWh, which would be triggered if wholesale prices have exceeded this level for three days at the TTF index, represents a good compromise solution, Greek energy minister Kostas Skrekas noted today ahead of the day’s Energy Council of EU energy ministers.

A gas price cap of 188 euros per MWh is well below a price cap of 275 euros per MWh initially proposed by the European Commission, which Greece, along with a number of countries, including Belgium and Poland, have rejected as too high.

This group of countries preferring a lower gas price cap believes a level of less than 200 euros per MWh is needed if higher natural gas prices for consumers are to be countered.

Decision on the price cap’s details are expected today following a political decision reached by EU leaders at last week’s Summit.

EU energy ministers are expected to decide on the gas price cap level, whether it will be applicable at all EU energy exchanges, and if it will be suspended should any EU member state request the measure’s suspension for reasons concerning supply security.

PM hopeful of a European gas price cap agreement

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Prime Minister Kyriakos Mitsotakis, on his way to today’s Council summit of EU leaders, expressed hope that a European agreement on a gas price cap could be achieved either today or next Monday, the latest, when the EU’s energy ministers are scheduled to meet.

The Greek leader stressed it is absolutely essential that Europe sends a clear message to energy markets as well as to Russia by underlining that Moscow’s exploitation of natural gas as a tool to burden European citizens and businesses will not be tolerated.

“We are close to being able to impose a price cap on gas. Our arguments are now known to all member states and I believe that, one way or another, we will find the necessary majorities to move in this direction,” Mitsotakis noted.

Greece supports the implementation of a gas price cap at 200 euros per MWh or less, applicable at all European hubs with an accompanying limit-up mechanism. Though well below the European Commission’s initial proposal of 275 euros per MWh, it seems to have gained increased acceptance by fellow EU member states.

However, a group of six EU member states – Germany, Austria, the Netherlands, Denmark, Estonia and Luxembourg – remains skeptical, fearing a low-level price cap could prompt market instability.

“In any case, regardless of European decisions, the Greek government is continuing to take all measures needed to support Greek households and businesses,” Mitsotakis noted, pointing out that 900 million euros in state budget money will be used in December to support low-income households and offer allowances for heating oil purchases.

EU energy ministers edge towards gas price cap deal

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The EU 27’s energy ministers appear to have made progress on a gas price cap agreement at yesterday’s emergency Energy Council, but divisions remain over the impact of such a measure.

Greek energy minister Kostas Skrekas’s proposal for a gas price cap of 200 euros per MWh, or possibly even less, applicable at all European hubs with an accompanying limit-up mechanism, appears to have gained further EU acceptance.

The European Commission’s original proposal called for a more elevated gas price cap that would go into effect if prices on the Dutch TTF hub reached 275 euros per MWh for two weeks and were more than 58 euros per MWh higher than LNG prices on the global market.

If adopted, the latest proposal’s purpose would be to subdue any rampant speculation and prevent a repeat of the spike in gas prices last August, when they briefly reached 350 euros per MWh.

A gas price cap at a level of approximately 200 euros per MWh, questioned by a group of five countries – Germany, Austria, the Netherlands, Denmark and Hungary – as they fear it could prompt market instability, and favored by roughly 12 countries, including Greece, will now be discussed by EU leaders at tomorrow’s Council summit.

If the leaders reach an agreement, the EU 27 energy ministers will meet finalize its formula and wrap up the deal at a meeting on December 19.

An agreement now would not result in an immediate drop in gas prices. Its main purpose would be to avoid any new surge in gas prices, as has been forecast by international analysts for around March, 2023, in the wake of increased winter demand and the need for countries to refill storage facilities for the rest of 2023 and the following winter.

EU 27 firmly divided on gas price cap, headed for summit

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Any chance of a gas price cap agreement at today’s Energy Council, involving the bloc’s 27 energy ministers, appears to have already been written off judging by European Commission president Ursula Von der Leyen’s comments yesterday, who noted a political solution will need to be sought at Thursday’s Summit of EU leaders.

Despite the ongoing energy crisis and need for solutions at a time when gas and electricity prices are once again rising, the EU appears more divided than ever on a gas price cap agreement. Proposal and counter-proposals have so far failed to lead towards compromise and a deal.

Greece and a further eleven EU member states are pushing for a gas price cap level of 160 euros per MWh, strongly opposed by six member states, Germany, the Netherlands, Austria, Luxembourg, Denmark and Estonia, a group supported on the issue by the European Central Bank. They contend a price cap would threaten market stability.

Germany appears willing to consider a higher gas price cap of 220 euros per MWh proposed by the Czech Republic, currently holding the EU’s rotating presidency.

The EU’s Committee of Permanent Representatives, tasked with agenda preparatory duties, failed to make any progress on the matter at a meeting yesterday following a previous failure on Saturday.

 

 

 

Gas price cap agreement unlikely at EU Energy Council

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EU officials failed to make any progress over the weekend on a natural gas price cap plan whose foundations were established by the bloc’s 27 leaders nearly two months ago, strongly suggesting an agreement will not be reached at tomorrow’s meeting of EU energy ministers but, instead, be deferred until the EU summit on Thursday.

A German-led group including Austria, Denmark, Estonia, Luxembourg and the Netherlands, now also backed by the European Central Bank, wants to avoid a natural gas price cap at 220-euro per MWh, as proposed by the European Commission, or any alternative of equal worth, in an effort to subdue gas prices and wild fluctuations, as was the case in August, despite signs of yet another surge in gas and electricity prices.

The group of six opposes Brussel’s gas price cap proposal, warning it could backfire and result in even higher natural gas prices as the measure could repel major gas suppliers from the European market. The group of six appears to prefer a gas price cap level well above the level proposed by Brussels.

Greece, Belgium, Italy and Poland are the biggest supporters of the the European Commission’s proposal.

Over the past few months, the price cap issue has gone around in circles, passed on by the EU’s 27 leaders to their respective energy ministers, who, in turn, have relayed it to their permanent representatives in Brussels, and back again.

EU headed for new impasse on gas price cap agreement

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The EU’s energy ministers appear headed towards another deadlock for a gas price cap agreement at an upcoming council meeting on December 13, which will prove a disappointment for Europeans as prices surge again.

Several EU member states seem to be resisting any sort of compromise for the establishment of a gas price cap level ahead of next week’s meeting of energy ministers, a measure now more urgent than ever before as winter temperatures begin to fall.

Gas prices surged yesterday at the Dutch energy exchange, a European benchmark, reaching 160 euros per MWh before easing to 140 euros per MWh and ending the day at 138 euros per MWh.

Though the prospect of high-priced natural gas is alarming, a price cap agreement does not appear to be a priority for a group of EU member states, led by Germany. Berlin, according to sources, wants the issue deferred until a summit of EU leaders, scheduled for next Thursday, two days after the meeting of EU energy ministers.

This, of course, would be a setback as it was at the previous summit, in October, that EU leaders referred the issue to the Energy Council, asking its members to work on details of an agreement reached by the 27 EU leaders.

Germany, joined by the Netherlands, Austria, Denmark, Estonia and Luxembourg, appears to be insisting on gas price cap at the level initially proposed by the European Commission, 275 euros per MWh, well above the 220-euro proposal forwarded by the Czech Republic, currently holding the EU’s rotating presidency.

EU member states divided on gas price cap level

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A European Commission proposal for a gas price cap of 275 euros per MWh will be strongly opposed at today’s meeting of the EU’s twenty-seven energy ministers by representatives of fifteen EU member states, including Greece, fearing this proposal could result in higher gas prices.

The fifteen energy ministers are expected to demand a lower price cap level of between 150 and 200 euros per MWh, which they view as the only possible solution that could secure lower prices.

Their approach, however, is opposed by a small yet powerful group of four EU member states, comprised of Germany, the Netherlands, Sweden and Finland, who fear a low price cap level could repel LNG suppliers and send them away to non-European markets.

Besides Greece, other EU member states in favor of a lower gas price cap level include Belgium, Bulgaria, France, Italy, Latvia, Lithuania, Poland, Romania and Spain.

A final decision on the issue is not expected at today’s meeting and will most likely be deferred until the next Council meeting of EU energy ministers, scheduled for December 19.

 

Energy minister and EU peers to push for lower gas price cap

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Energy minister Kostas Skrekas and a number of EU peers are expected to push for a lower gas price cap at tomorrow’s Council of energy ministers, believing the European Commission’s proposed level of 275 euros per MWh will not offer any solutions.

The European Commission, through the introduction of a price cap on gas, is seeking to address enormous discrepancies, as was the case in August, between the market price of derivatives and physical LNG deliveries.

Besides the group of EU energy ministers, Eurometaux, the European industry association, as well as other European agencies, have also expressed concern over the level of Brussels’ proposed price cap level for natural gas.

Briefing its members yesterday, Eurometaux estimated that a big price surge, well over current levels of between 110 and 120 euros per MWh, would be needed for the proposed price cap to be activated. A price cap of 275 euros per MWh would hardly ever be triggered, the association noted.

Eurometaux, in its briefing, also enquired whether the European Commission is proposing such an elevated gas price cap level because it foresees a new and far more severe gas crisis in 2023.

Brussels proposes gas price cap for extreme pricing situations

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A price cap on gas, to serve as a market correction mechanism, will only be activated under certain combined conditions, according to a draft proposal sent by the European Commission to the EU’s 27 energy ministers.

A first round of negotiations took place yesterday between representatives of member-state delegations, ahead of an informal Council of energy ministers on November 24, when a first attempt will be made to reach an agreement on the price cap plan.

According to well-informed sources, Brussels’ draft proposal, seeking to reconcile two opposing EU blocs, one comprising Greece, Italy, Poland and Belgium, and the other, Germany, the Netherlands, Austria and Hungary, will not lead to consensus at next week’s Council of energy ministers and, as a result, will be referred to their ensuing meeting.

Brussels’ draft proposal is intended to act as an effective tool against excessive and extremely high gas prices. The plan is to trigger it into action only if prices reach extremely high levels (compared to international markets), the objective being to avoid significant disruptions in supply contracts, which could lead to serious risks concerning security of supply.

North-South gap remains, crisis solution unlikely soon

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All developments suggest Europe may need to cope without a common energy solution this coming winter as there is nothing to suggest authorities are close to reaching an agreement at the extraordinary Council of Energy Ministers on November 24.

If so, any decision making will be postponed until the regular Council of Ministers, scheduled for December 19, or passed on to the Swedish EU rotating presidency, which will succeed the Czech presidency on January 1.

Even though the European Commission is reportedly speeding up procedures for a temporary gas cap, following a warning by 15 member states to veto the overall energy package, the chances of a gas cap being ready by the forthcoming meeting of energy ministers are very slim.

Disagreement between the EU 27 remains, dividing Europe’s north and south. Germany insists the introduction of even a flexible price cap could drive gas suppliers out of European markets.

The willingness of European authorities to take action has weakened as the risk of an out-of-control energy crisis has receded. The continued de-escalation of gas prices (just under €114/MWh yesterday) may be good news for households and businesses, but it has led the EU towards a general complacency.

 

EU gas price cap hopes set back, weekend talks needed

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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.

 

EU energy ministers agreement in Prague today highly unlikely

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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.

 

Greece, gas price cap partners seeking to convince Germany

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Greece, one of five EU member states most supportive of a price cap on natural gas, is busy preparing a latest collective effort, with its partners, to convince Germany of the need for an adjustable price cap on gas at an informal meeting of EU energy ministers in Prague tomorrow.

The prospects remain ambiguous but Berlin now appears ready to consider the extension of a common loan, as part of the plan, as long as the funds are extended as loans and not as subsidies. Until now, Germany, along with the Netherlands, have opposed to such a solution.

A briefing to be held today ahead of tomorrow’s informal meeting should indicate whether consensus can be achieved between the EU’s 27 energy ministers.

The status of tomorrow’s meeting was deliberately kept informal for greater flexibility towards achieving a solution. If the fundamentals for measures are set during this preliminary phase, they could be finalized at the next official EU summit, scheduled for October 20 and 21.

Political agreement sought for gas price cap, eyes on Germany

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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.

Germany considering price cap, gas usage drop a condition

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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.

Firmest gas price cap backers in talks with German minister

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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.

 

Minister to propose general gas price cap, protection fund

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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.

 

 

RES sector opposes Brussels proposal for price cap on power production

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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.”

 

No EU decision seen today for cap on Russian gas prices

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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.

 

 

Brussels looks to combine cap on gas for power, windfall tax

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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.

Electricity producer price cap mechanism launched Friday

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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.