Today, the energy ministers of EU member states met in Brussels to agree on measures to prevent the financial consequences of the energy crisis as soon as possible. Belgian Prime Minister Alexander De Croo recently commented that Europe is ‘facing deindustrialization and a serious risk of fundamental social unrest’ due to the energy crisis. Gas prices are about eight times higher than the average for this time of year, and on Friday they fell by as much as 8.2%, wiping out weekly gains.
European Commission President Ursula von der Leyen has put forward several proposals aimed at reducing energy prices for consumers and businesses in the bloc. These include capping the price of Russian gas, limiting the profits of companies that generate electricity without gas, and implementing measures across the bloc aimed at energy savings.
The price of electricity is dictated by the price of the most expensive energy source used for production. For some time now, this has been gas, whose price has reached record levels primarily due to Russian aggression against Ukraine and Russia’s use of energy as a tool against the West. Because of this system, companies that do not use gas in electricity production benefit from the significant rise in electricity prices.
For this reason, the Commission proposes that such low-cost producers, such as nuclear power plants, wind farms, and coal-fired plants, have their revenues capped at 200 euros per megawatt-hour, with anything above that being directed towards consumers and the economy. Current reference prices in Germany are around 400 to 500 euros per megawatt-hour.
This proposal has a good chance of being accepted, but some countries warn that it will not be enough to bring down electricity prices.
Capping the Price of Russian Gas
The Commission also proposed a mandatory reduction in consumption during peak loads, which would then reduce the need to activate gas power plants to meet increased demand. Some member states oppose making the reduction in consumption mandatory.
One of the ideas advocated by several member states is to break the link between the price of gas and the price of electricity, meaning that electricity produced from cheap sources would no longer be sold at the price of the most expensive energy source. The Commission has not put forward such an idea, but the Czech presidency has included it as a basis for discussion.
It has been proposed to limit the price at which gas is imported from Russia. Countries that are heavily dependent on gas supplies via pipeline from Russia, such as Slovakia and Hungary, fear that Russian President Vladimir Putin could respond to this by completely halting gas supplies to Europe, while others warn that he could do so regardless of what the EU decides.
Many Countries Dependent on Russian Gas
Germany does not support a cap on the price of Russian gas because some countries still depend on those supplies, Economy Minister Robert Habeck told reporters in Brussels, adding that he would only support a cap if countries like Hungary agree to the idea, but also that Germany currently cannot cope without Russian supplies.
– Some countries still have dependencies that force them to use this gas. It would be inappropriate to say that Germany always calls for understanding, while there is never understanding for other countries – said Habeck.
Austria is a country that remains dependent on gas from Moscow. Although this dependency has decreased, the country also does not support a price cap, said Energy Minister Leonore Gewessler. Germany is also against a general cap on gas prices because such action would send the wrong signal to the market. Habeck supports ‘a price cap for basic energy needs’, but consumers should pay more when their consumption exceeds a certain amount.
More than half of German voters want Economy Minister Robert Habeck to keep the three remaining nuclear power plants in the country operational after April to ensure sufficient energy supply, a recently published survey showed. Habeck, a member of the Green Party, announced this week that two plants would be on standby until mid-April, while the third would be closed at the end of this year as planned. This has sparked numerous criticisms, and a public television survey by ZDF showed that less than a third of voters support the minister’s plan. The survey involved 1,299 voters from September 6 to 8.
Hungary Against Any Restrictions
Luxembourg’s Energy Minister, Claude Thurmes, said before the meeting that he believes there is a possibility of reaching an agreement on a proposal to take excess revenues from non-gas electricity generators and use them to reduce energy bills for consumers.
– We must be flexible, but I think this is the best way to collect this unjustified money from the market and bring it to consumers – said Thurmes.
– We are in an energy war with Russia – said Czech Industry Minister Jozef Sikela at the start of the meeting. – We must send a clear signal that we will do everything necessary to support our households, our economies – he added.
Hungary, a country that is heavily dependent on Russian gas and has increased its imports, has meanwhile stated that it opposes any price restrictions and believes that such measures would be against European and Hungarian interests. The country’s Foreign Minister Peter Szijjarto said in a video on Facebook that a cap on gas prices would lead to a disruption of Russian gas supplies.
