The European Commission did not adopt the proposal to cap the price of all imported natural gas due to too much internal divisions.
In response to high natural gas prices, the European Commission put forward a basket of proposals on Tuesday, local time, including emergency measures such as joint purchases of natural gas and price caps on European natural gas benchmarks.
Germany, the biggest victim of the European energy crisis, plans to impose a price cap on electricity.
In addition, by the first quarter of next year, the European Commission plans to propose a new design for the electricity market to decouple electricity and natural gas prices.
New LNG price benchmarks, price caps on European gas benchmarks
At an EU summit on Oct. 20-21, EU leaders will discuss a basket of proposals made by the European Commission on Tuesday to curb high gas prices.
Specific content includes:
Until March 2023,Create a new LNG price benchmark;
EU member states jointly purchase natural gas to reduce the bidding risk of member states in the global market;
Propose a price correction mechanism in the short term,Establish a dynamic price limit for all transactions on the Dutch Gas Exchange (TTF), the European gas price bellwether, with a one-day price limit.
In emergencies, help member countries obtain natural gas from other countries.
EU leaders will support the proposals “broadly”, according to the revised draft conclusions of the EU summit. According to the rules, these proposals require a supermajority of EU member states to pass, that is, at least 15 of the 27 member states must vote in favour, and they must account for at least 65% of the EU’s total population to pass.
It is worth mentioning that due to the excessive internal differences,The European Commission did not include in the basket proposal to limit the price of all imported natural gas advocated by most EU member states.
Separately, EU member states have also asked the commission to come up with an “interim EU framework” to cap gas prices at levels that “contribute to lower electricity prices,” the draft shows.
European Commission President von der Leyen said on Tuesday that the commission was still evaluating the idea. Also because of the disparity, the idea is expected to struggle to gain support from a majority of leaders. France is likely to support it, but Germany and the Netherlands are concerned that the move will lead to an increase in gas demand.
New model of electricity market
European Commission Vice-President Maros Sefcovic said the commission would propose a new design for the electricity market in the first quarter of next year to cut the link between gas prices and electricity prices.
“We will decouple gas from electricity prices,” he told the European Parliament in Strasbourg, France, on Wednesday. “We know that the market design that served us until the pre-war period is no longer valid.”
According to a previous article in The Wall Street Journal, the cost of generating electricity from natural gas determines the price of electricity in Europe. Because natural gas power plants have the advantage of being able to scale up or down faster than other thermal power plants (nuclear, lignite, hard coal) and their marginal cost of generating electricity has always been higher than lignite or nuclear.
Germany plans to cap electricity prices
Media reported on the 19th local time that the German economy ministry plans to limit the price of electricity for personal and industrial consumption to help them cope with soaring energy bills.
Economy ministry wants utilities sector, report saysOn the basis of encouraging energy savingSubsidies for residents.
The plan will be funded through measures such as a windfall tax on low-cost power generation companiesit is reported that the tax will account for 90% of the profit of the power generation company.
The government is expected to discuss the plan on November 18.
Earlier this month, the German Committee of Natural Gas Experts proposed two measures to ease energy bills: one is to pay households and small and medium-sized enterprises a one-time payment of about one month’s natural gas bill; the other is to encourage energy conservation on the basis of state subsidies for consumption. 60%-80% of the total, and consumers pay the rest according to the market price.
Germany’s energy regulator believes that significant savings in energy use are necessary to avoid winter rationing and gas emergencies. Earlier this month, Klaus Müller, head of Germany’s Federal Network Agency (Bundesnetzagentur), said German households, industry and businesses need to cut energy consumption by at least 20 percent to survive the winter.
Germany has completed its goal of filling its natural gas storage tanks to 95% more than two weeks earlier than originally planned. German Chancellor Scholz announced on the 17th that three nuclear power plants that were scheduled to close before December 31, 2022 can continue to operate until April 15, 2023.
This is rare good news for Europe’s largest economy.
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