Debate: EU response to the increase in energy prices in Europe
Date: TUESDAY, 13 SEPTEMBER 2022
Speaker: Kadri Simson
Language: EN

At the same time, much has been done this year to untie Europe from Russia by diversifying, reducing and investing, we have diversified away from Russian fossil fuel sources. We adopted in July a coordinated gas—demand reduction plan, and our joint storage policy is working: storage is today 84% full. We are investing at a fast pace in home—grown renewable energies. Yet, as Russia is fuelling tensions on the gas market, we are seeing ripple effects on the electricity market. Climate change also plays a part here. The summer has resulted in less hydro and cold—transport issues, combined with high temperatures and maintenance. This has also led to lower than usual nuclear power generation. The perfect conditions have been created for the spike in electricity prices that we are witnessing. I do not need to tell you that this is hitting our citizens hard. Households, especially the most vulnerable, small and medium companies, industry, are struggling to make ends meet. Our competitiveness is hampered and volatility is reaching financial markets. More and more energy companies are looking at increased margin goals or are required to post higher collaterals in cash to underpin their operations. The end result is a liquidity problem. This is not sustainable. Last week, President von der Leyen set out elements for a coordinated emergency intervention at EU level. And tomorrow we will be bringing forward a proposal that tackles these issues. Let me briefly tell you what are the areas for action there. First we need to take a serious look at our electricity demand in a smart way. We will propose to reduce electricity demand to bring more balance to the market. In particular, we will propose a mandatory target for Member States to reduce consumption in peak price hours, to relieve stress on electricity generation, to reduce gas consumption and to have a positive effect on prices. We will give Member States the flexibility to design their measures as they see fit. This leads me to the second measure. Today, high cost—margin producers, normally gas companies, often set the final price for wholesale electricity. A company that produces electricity with lower costs would benefit massively from the high prices on the market, resulting in enormous revenues. Final consumers do not get the benefits in their bills of the growing share of lower—cost technologies like renewables. We want to introduce a correction to the market rules that will address this issue. We are proposing an EU—wide limit to the remuneration for low—carbon technologies. In this way they would receive only the difference between the cost of production and the cap. The rest would generate revenues for Member States to support vulnerable consumers. And in this way, without altering the market functioning, we can correct it and make it work better for consumers and business. The framework will allow national schemes that are designed in the same spirit to continue. These are exceptional circumstances and we believe all energy sectors should contribute. Oil, gas and coal companies are also making huge, unexpected profits. So we are considering a solidarity contribution on these companies. The revenues should be put to good use, helping the vulnerable industry or reinvested in cleaner technologies. Finally, there is need to address the liquidity problem arising in the financial markets for energy products. These are not challenges where we can intervene through regulation. What we can do is to work together with ESMA and securities market regulators on technical standards related to the eligibility of collateral and margins and on possible ways to limit excessive volatility. We will also launch a survey on the temporary state—aid crisis framework to see how we can streamline procedures or expand the scope for state guarantees. Honourable Members, these are the main ideas we are working on. There is no magic wand to bring prices back to the pre-war levels, but with a targeted emergency package, we can ease the pressure on prices and help citizens. I am looking forward to continuing to assess whether other more intrusive measures could lower prices while guaranteeing supply, or not. While a gas price cap on Russian pipeline imports would further address the current manipulation of supplies and prices, more work is needed to assess the possible adverse impacts on some Member States. And we are also deepening our analysis on how a horizontal cap on all gas imported into Europe could work, and its implications. The Commission is also ready to kick off work on a complementary EU price index for LNG. The current pricing benchmark for gas, the TTF, is a pipeline index and no longer properly reflects the real supply and demand of the market. In parallel, the longer—term view hasn’t gone away. We are working intensely on our REPowerEU goals and on bringing the energy platform to the next stage. We kick—started the preparation of the reform of the electricity market for early next year, and tomorrow this Parliament will have important votes on the Renewable Energy Directive and the Energy Efficiency Directive. More renewables and efficiency is the way to go: let’s work together, and with the Council, to get these two pieces of legislation adopted as soon as possible. Let’s fast-track our clean energy transformation. In this tough moment, we must be confident that we came a long way on the road to REPowerEU, and with this determination and unity we will prevail. I am looking forward to hearing your views and suggestions.