The president of the European Commission spoke of a common European response to energy costs a few hours before the informal summit in Prague
“Only a common European response can reduce energy costs for families and businesses and provide energy security for this and the coming winter” he emphasizes the President of the European Commission Ursula von der Leyen in her letter to the 27 member state leaders ahead of the informal Prague Summit underlining the need to work “with member states” to develop an intervention to curb prices in the natural gas market. In addition, Ms. von der Leyen states that “we must recognize the risks of a gas price cap and implement it with the necessary safeguards.”
It points out at the same time that “the main price benchmark for all natural gas traded in the EU, the TTF, is no longer representative of imported gas. The Commission has started work on a complementary EU price index to better reflect Europe’s energy reality and ensure a better functioning market that favors lower prices.”
As European diplomats point out, there appears to be an opening on the part of the European Commission, with other sources focusing on the unity of the 15 member states that signed the letter (promoted by Greece, Italy, Belgium and Poland) for a general cap on natural gas underlining that they will put pressure on the upcoming informal session and ask for a “strong political message” on the need to lower gas prices.
Evolution is seen as a vindication of his propositions Greek Prime Minister Kyriakos Mitsotakis who was the first to publicly submit the idea of ​​a common European response to the energy crisis caused by Russia’s invasion of Ukraine and to Vladimir Putin’s attempt to instrumentalize energy at the expense of the European peoples.
In particular, Ursula von der Leyen states in the letter:
“We are once again at a critical juncture. The energy crisis is serious and has entered a new stage. Only a common European response can reduce energy costs for families and businesses and provide energy security for this and the coming winter.
Russia’s unprovoked war of aggression against Ukraine and its use of energy supplies as a weapon has exposed our dependence on Russian fossil fuels, tested our supply security tools, and driven energy prices to unprecedented levels. Tight supply conditions and high uncertainty in global energy markets have increased attempts to blackmail Russia by arbitrarily cutting off pipeline gas supplies.
Instead of honoring its long-term contracts, Russia is unilaterally cutting gas supplies, raising spot market prices and LNG deliveries – thus boosting profits despite significantly lower supplies.
We have reacted with unity, determination and solidarity. Our gas storage capacity is already close to 90% filled. We compensated for reduced gas supplies from the Russian pipeline with more diversified imports from trusted and reliable partners. And thanks to the strong
commitment of our Member States and the Presidencies, we reached quick agreements
emergency interventions to save gas and electricity. Work also continues to address liquidity issues in the derivatives exchanges that support energy markets.
While natural gas prices have come down in recent weeks, they remain very high and are taking a heavy toll on our people and economy. We must protect our single market, which has repeatedly provided resilience in the face of crisis. In addition, we must maintain our jointly agreed climate ambition, which will also strengthen our sovereignty. To avoid serious fragmentation, we need a united and common European response. We must maintain a level playing field, without distortions of the single market and act together in a spirit of enhanced solidarity between Member States and with our neighbours.
Having listened carefully to the discussion of the Energy and Finance Ministers over the past few days and ahead of our upcoming debate in Prague, let me present our roadmap for further action.
First, we need to take action that can reduce the price we pay for our gas imports while maintaining security of supply.
Therefore, I recommend intensifying negotiations with our reliable suppliers to reduce the prices of imported gas of all kinds. Thanks to our trusted partners like Norway and the USA, we have been able to replace Russian gas through pipelines at record speed. A negotiation corridor that lowers the cost of procurement from these partners would be in our mutual interest.
Our ongoing talks with Norway should result in a long-term energy partnership that reflects our shared ambition to decarbonise, offers a prospect for lower gas prices amid the current crisis.
The European Energy Platform should play a central role in ensuring our access to competitive gas supplies globally. I call on you and the companies to strengthen the common approach. In order for the platform to play its role effectively, I envisage a proposal that would set rules for the participation of Member States and industry. The EU common energy platform should, above all, coordinate joint filling and storage management ahead of the next filling season. We must avoid a scenario in which Member States overbid
each other and raise prices. The common market will strengthen the effort to strengthen the high rents of suppliers in the current market situation. It can also lead to greater access to new or additional sources of natural gas in all EU Member States, avoiding costly and inefficient
auctions. With Member States and companies, there could be a long-term commitment to partnerships with suppliers, providing a perspective from the current emergency situation to a future supply of hydrogen from renewable sources.
Second, I propose that we work with member states to develop an intervention to curb prices in the natural gas market.
Today, much of Europe pays a higher price for its natural gas, especially LNG, than global competitors. The main price benchmark for all natural gas traded in the EU, the TTF, is no longer representative of imported gas. The Commission has started work on a complementary EU price index to better reflect Europe’s energy reality and ensure a better functioning market that favors lower prices.
Pending the introduction of such a complementary benchmark, we will have to consider a capping price in relation to the TTF in a way that continues to ensure gas supply to Europe and all Member States and this will demonstrate that the EU is not ready make it any price for natural gas.
As the EU imports almost all the natural gas it consumes, the deeper the public intervention we envisage, the more demand reduction and supply solidarity we need. Therefore, we must recognize the risks involved in a cap on natural gas prices and implement it with the necessary safeguards. Gas savings obligations established through EU-wide demand reduction auctions, as well as binding solidarity agreements between member states, will need to be more demanding. The Commission will work closely together with your authorities to design a possible capacity restriction measure, taking into account national differences in the energy market.
Third, high gas prices drive high electricity prices. We should limit these inflationary effects of natural gas on electricity, everywhere in Europe. For this,
accompanying our action on imported natural gas, we are prepared to discuss introducing a temporary cap on the price of natural gas used to generate electricity. This should reduce it
electricity prices, in view of a structural reform of the electricity market. Such a cap agreed by the EU should be designed so as not to increase overall gas consumption. Such a measure requires both binding savings requirements to compensate for weaker price signals and ensuring cross-border flows of subsidized electricity to our neighbors as well.
Fourth, I believe we need to boost investment to accelerate the transition to energy independence. Investments in infrastructure such as pipelines, interconnections or renewable energy and energy efficiency (such as insulating homes and installing heat pumps) will help us all be less exposed to high fossil energy prices and drive our strategy forward
autonomy. With REPowerEU we have taken important first steps in solidarity. However, this will not be enough to ensure a necessary level of reform and investment in all member states needed in this energy crisis. The Commission will consider additional sources of funding to strengthen REPowerEU.
Finally, we will continue our work on the structural reform plan for the electricity market. By the end of the year we will present our ideas to the Council and Parliament for reform that makes the electricity market fit for a more decarbonised future.
Let me also return to the recent sabotage of the Nord Stream 1 and Nord Stream 2 pipelines. We cannot tolerate any deliberate disruption of the European energy infrastructure.
I look forward to presenting you with measures on preparedness, stress test response, international partnerships and information sharing.
I look forward to our informal discussion in Prague before the European Council in October. I believe it will enrich the proposals the Commission is ready to put forward, reflecting our common response to the huge challenge we face together in the coming winter.”
RES-EMP
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