European energy ministers reached an agreement on Monday to set a cap on the price of gas after months of unsuccessful attempts. The decision has been adopted by a majority after overcoming the last reluctance and based on a text that moderates the initial claims of governments that, like the Spanish one, had opted from the beginning to intervene in the energy market. The agreement provides that the price cap will be activated when it exceeds 180 euros per megawatt in the Dutch market -the main European reference for gas prices- for more than three days in a row and if the average price of liquid natural gas (LNG) of world markets also exceeds that of natural gas by more than 35 euros.
The Czech Minister of Energy, Jozef Sikela , had already announced that in this umpteenth meeting – the last possible one before the Christmas holidays – it had been possible to unblock the issue that has been occupying the technicians of the European Commission for months. “We have found an important point of agreement that will protect citizens from rising energy prices, with a realistic and effective mechanism, which includes the necessary guarantees for security of supply and stability of financial markets.”
The heads of State or Government tried to approximate positions in the last European Council last Thursday, trying to overcome the reluctance of German Chancellor Olaf Scholz. For Germany, limiting the price at which European countries can buy gas in international markets does not serve to contain the price of this source of energy and, on the contrary, guides suppliers towards other markets that are willing to pay a higher price. high or tall.
In these months Germany has changed its energy mix to recover part of its nuclear capacity, it is burning coal again and it has also built its first LNG terminal , so the debate has stopped affecting it. For this reason, the Netherlands and Austria, the countries most attached to their previous position, have abstained from voting. Hungary has been the only country that has opposed it, although its stormy relationship with the European Commission and its good relations with Russia, which is its only energy supplier, have weighed on this decision.
The agreement is also very far from the first proposal presented by the Commission, which provided for a ceiling of 275 euros per megawatt for three consecutive weeks to enter into force. Gas was trading this Monday at 110 euros on the Dutch TTF market .
The Commission and countries opposed to market intervention have warned of the risk of liquefied natural gas (LNG) suppliers leaving Europe in favor of Asian customers who pay more attractive prices. To remedy this, it has been agreed to activate the cap on gas only when it reaches a price higher than the international price of LNG. The fact that European gas reserves have been preemptively filled to prevent Russia from blackmailing its European customers over the winter has also played an essential role in facilitating the price cap deal.
The European Commissioner for Energy, Kadri Simson , acknowledged that “the mechanism has a lower trigger level than the Commission’s initial proposal, but maintains the essential characteristics of a market correction tool and contains a stronger set of safeguards.” to avoid possible unwanted effects.
‘The Commission’, Simson insisted, ‘has always been very clear that this mechanism has benefits, but it also carries risks. For this reason, additional safeguards have been included in terms of LNG supplies, liquidity in financial markets and gas consumption. In particular, we have stronger provisions in place in case there is a significant increase in margin calls, a decrease in derivatives transactions or a shift in transactions outside of the EU”, situations that could put supply at risk.
The agreement reached allows member countries to adopt two other emergency texts aimed at cushioning the impact of the energy crisis. The first provides for grouped gas purchases, in which consortiums of companies from different countries would participate, to jointly obtain better prices. At the same time, this system provides for a solidarity mechanism that must guarantee the supply of countries threatened by shortages.
Another of the closed commitments provides for the countries to agree to simplify the administrative processing of development files for renewable energy facilities to speed up their deployment throughout the European territory and provide the European Union with an alternative energy source as soon as possible. fossil fuels.
The European Commission insists that the next step in the strategy to guarantee its energy independence must be the deployment of Repower EU funds to accelerate the development of renewables and increase Europe’s energy autonomy with respect to its main suppliers, whose political instability has passed a heavy bill to Europe.