Energy crisis: How Athens evaluates the Commission’s proposals
This satisfaction was also expressed by Prime Minister Kyriakos Mitsotakis himself through tweet of, where he emphasizes that the Session Top of October 20th and 21st will have the potential to reduce “extreme volatility”.
“I salute her total beam meters proposed by the president of the Commission and above all the integration of two proposals that Greece has made for a long time,” noted the prime minister.
“The upcoming European Council is an opportunity to restore control to our energy markets by putting a cap on prices and reducing extremes. This can be a decisive step in our effort to reduce energy prices for European citizens and businesses,” Mr. Mitsotakis emphasized.
As the prime minister himself underlined, the package of measures of the E.U. adopts two Greek propositions, which are considered particularly critical.
It’s about correction mechanism prices in the energy exchange but also the circuit breakers in the markets of energy producers.
The Commission also proposes a new one regulation emergency necessity for the energy crisis in terms of dealing with the high prices of natural gas but also ensuring the energy supply.
Another measure is the joint supply natural gas.
THE Greek proposal is widely supported, with 15 member states of the union agreeing to the measures proposed by Athens.
This, however, does not mean that there will be immediate and quickly adoption of these measures.
Although its states Europe are facing a difficult winter and households are “knee-jerking” under the weight of energy and not only price hikes, there are different “schools of thought” within the EU to deal with the situation.
The biggest obstacles are raised by Germanycausing concern not only in the member states but also within Brussels.
The reference of the president of the Council, Charles Michel, who in his letter to the 27 states:
“We must act urgently. In particular, we must urgently intensify our three lines of action: reducing demand, ensuring security of supply and containing prices.”
It is noted that the “serial” of discussions is going to continue next week, in the council of of Ministers of Energy, on October 25.
The three main proposals of the Commission:
1. EU countries should proceed to common gas market for at least 15% of gas storage capacity in Europeto cover 90% of warehouses by 1the November 2023. Member States will be responsible for coordinating domestic companies participating in the markets. Companies should not buy Russian gas.
Specifically, the Commission will assign a service provider to organize the concentration of demand at EU level, bundling gas import requirements and looking for market offers to meet the demand. Companies will be able to form a European gas consortium, under EU competition rules. Markets that will help smaller member states and companies in particular, which are in a less favorable position as buyers, must have access in natural gas volumes with better conditions.
The Regulation also includes provisions to enhance the transparency of the intended and final gas supply markets in order to assess whether the objectives of security of supply and energy solidarity are being met. The Commission must be informed before the conclusion of any natural gas purchase or memorandum of understanding of a volume above 5 TWh (just over 500 million cubic meters) and may issue a recommendation on potentially negative impacts on the operation of the common market, security of supply or energy solidarity.
2. Solidarity mechanism between Member States in case of supply shortages. Member States will report every two months on their progress. The Commission stresses that it is “ready to activate the EU alert” or review the reduction target if current measures prove insufficient. To enhance preparedness for possible emergencies, the Commission is proposing measures to allow Member States to further reduce non-essential consumption to ensure that essential services and industries are supplied. “This should in no way affect the consumption of households that are vulnerable customers,” the Commission stresses.
Since not all Member States have concluded the necessary solidarity agreements, the Commission proposes rules that would ensure that each Member State facing the emergency that will take place from others, as opposed to a “fair compensation”. The solidarity obligation will be extended to non-connected Member States with LNG, provided that the gas can be transported to the Member State where needed. To optimize the use of LNG and pipeline infrastructure, the Commission proposes new tools to provide information on available capacity and new mechanisms to ensure that capacity is not tied up and used by market players. It is also proposed to protect critical infrastructure in light of the suspected sabotage of the Nord Stream 1 & 2 gas pipelines.
Also, the Commission proposes to use 10% of the Cohesion Fund for the period 2014-2020, worth approximately 40 billion. euros, to deal with the energy crisis.
The Commission intends to put forward proposals to strengthen the EU’s economic power for REPowerEU, to speed up the transition to clean energy and avoid fragmentation in the single market.
3. The creation of a new pricing index for Liquefied Natural Gas (LNG) until March 2023 and in the interim the Commission proposes the creation of a price correction mechanism to set a dynamic price limit for transactions on the TTF natural gas exchange.
“The common gas exchange, the TTF, no longer accurately reflects the price of LNG transactions in the EU,” the Commission stresses. The Commission is therefore proposing to develop a new complementary price reference point with ACER (European Agency for the Cooperation of Energy Regulators) to address this ‘systemic challenge’.
The new benchmark will provide for stable and predictable pricing for LNG transactions. The Commission commissioned ACER to create an objective daily price assessment tool and then a point that could be used by energy market operators to adjust the price in their gas contracts.
It is noted that as expected, the emergency measures proposed do not include an immediate cap on natural gas prices, although most EU countries say they want one.
However, the European Commission requested the approval of the member states for a proposal that would define a temporary “maximum dynamic value” (dynamic ceiling) in the trading of the TTF natural gas index on the Dutch market, which is the benchmark for the European market.
As stated, the cap on the price should be subject to terms and conditions, such as that it “does not cause an increase in demand for natural gas in Europe”. “Dynamic ceiling will activate when working”, i.e. not directly, as the President of the Commission mentioned.
Trades at a price higher than the dynamic limit are not allowed on TTF. The one that helps to avoid extreme volatility and excessive prices.
It is recalled that during the informal session of the previous week (12/10) the ministers Energy of the EU they reached a general agreement in favor of buying together natural gas, which stipulates that the countries should start buying natural gas together before next summer, and also agreed that an alternative natural gas reference price is needed. It is noted that the EU energy ministers want the mechanism for common natural gas markets to be ready for next winter.