Energy crisis: Today the Commission’s proposals – What will be done with the cap on natural gas

By Chrysostomos Tsoufis

“We will propose unprecedented measures for an unprecedented situation” assured on Friday the Energy Commissioner Kadri Simpson raising the bar of expectations. The fullness of time has come and everyone is anxiously awaiting the Commission’s proposals for dealing with the energy crisis and the drop in prices expected today.

Starting from the easiest to agree between the member states, Commission expected to propose mandatory reduction of electricity consumption especially in the cutting edge countries when production units that use natural gas are called upon to contribute to meeting the growing energy needs.

As has already been reported in the international media, Brussels will propose ceiling on the revenues of power producers that do not use natural gas. The first information that wants the ceiling to be between €180-200/Mwh probably does not satisfy the government which in the Greek revenue recovery mechanism has set the ceilings much lower and therefore if the Commission’s proposal is passed, the revenues will decrease. At the same time there will be a proposal for solidarity levy on the oil industry at least 33% in its profits. The revenues from both measures should be used by the member states to finance support programs for households and businesses as well as for investments in RES.

There will also be suggestions for energy exchange with the aim of stabilizing the futures market. In Brussels they have finally seen that the Dutch TFF index is not at all representative of the natural gas market and mainly concerns natural gas transported by pipelines, and for this reason the creation of a complementary index that will have to do with the LNG market is expected.

The Commission will attempt within the existing framework of temporary state aid to create financial instruments with state guarantees in order to ensure the liquidity of companies active in the supply of energy.

Of course, the elephant in the room is none other than the ceiling on the price of natural gas. At the emergency meeting of energy ministers on Friday – there will be another on the last day of September – no agreement was possible. And that’s because a group of countries, including Greece, want to put a cap on all natural gas entering Europe – therefore also LNG – for fear of further… irritation by Moscow, which threatens to close the taps of all pipelines that bring natural gas to Europe. In such a case, the Turkstream pipeline from which Greece is supplied with Russian natural gas would also be closed.

The Commission can state that everything is on the table, but it is a given that would like to avoid a blanket ceiling which according to Brussels would cause problems with Europe’s traditional LNG suppliers such as the US and Qatar.

It remains to be seen if it will overcome its… suspensions or if it will insist on the ceiling only on pipeline gas which many countries characterize as a political measure that does not solve the problems of the market…..

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