The European Commission will use a long-planned reform of EU gas market rules, due in December, to address the current supply crunch on the market. This is according to the EU’s energy chief who added there are sufficient reserves to last the winter.
“By the end of the year, I will propose a reform of the gas market and will review in that context issues around storage and security of supply,” said Kadri Simson, the EU’s energy commissioner.
She made the remarks on Wednesday (6 October) during a debate in the European Parliament about the ongoing energy price crisis.
Soaring gas prices have hit the poorest EU citizens and impact business investment decisions, threatening to slow the economic recovery.
One of the ideas proposed by Spain is for the EU to buy gas jointly to take advantage of the power of its single market of 450 million consumers. A strategic EU gas reserve could then be created.
Reacting to the proposals, Simson said joint procurement and storage of emergency reserves were ideas worth exploring.
The upcoming revision of EU gas market rules is also an opportunity to crack down on speculators, according to Claude Turmes, the energy minister of Luxembourg.
“The EU should use the opportunity of the gas directive revision at the end of the year to look more precisely at the behaviour of some traders on the market,” Turmes told journalists in Brussels on Friday (1 October).
“There are indications that there are some extremely speculative traders on the market. And probably there is a need in this gas directive to come up with more detailed regulation on traders,” he said.
Turmes proposes imposing a minimum of hedging to all market participants to prevent excessive speculation on gas markets.
“It’s very important to understand that most gas companies in Europe have hedging strategies. We know that they have bought gas over the last year and a half at much lower prices. They have hedged their risks, and the price rise during the winter should be contained,” he said.
Enough storage for winter
Speaking in the European Parliament, Simson also sought to reassure markets, saying EU countries have enough gas in storage to last through winter.
“Gas underground storage is above 75% across Europe. This level is lower than the ten-year average but adequate to cover the winter season needs,” Simson told EU lawmakers in Strasbourg.
The price spike has arrived as the EU prepares for a major upgrade of climate policies, stoking concerns among poorer central and eastern EU states that steps to increase the cost of polluting fuels could push more households into energy poverty.
Repeating earlier statements by the European Commission, Simson insisted that the long-term response at the EU level is to increase production from renewable sources and boost energy efficiency.
“Wind and solar have continued to generate the cheapest electricity in Europe in recent months” and “are not exposed to price volatility,” she remarked.
In the short term, she said EU governments can provide targeted support to consumers through direct payments to those most at risk of energy poverty, cut energy taxes, and shift charges to general taxation.
To help citizens, governments could also use some of the money from selling carbon permits under the Emissions Trading System, Simson added, saying higher carbon costs have provided EU governments with an extra €10.8 billion they can draw from. Competition authorities at the EU and national level are also looking at curbing speculation in energy markets.
The Commission will present a list of measures in line with EU laws next week.
As part of those plans, the Commission will also look at the overall price composition of the electricity market, said Ursula von der Leyen, the president of the European Commission.
“If electricity prices are high, it is because of the high gas prices, and we have to look at the possibility to decouple within the market because we have much cheaper energy like renewables,” von der Leyen said during a visit to Estonia on Tuesday (5 October).
This is in line with demands by France, which has called for de-linking the price of electricity from gas markets in favour of tying it to the average cost of electricity production in every EU country.
Although gas only accounts for one-fifth of electricity production in Europe, gas-fired power plants have become price-setters on the electricity market because they can be fired up at short notice to respond to demand peaks.
Brussels is determined to ensure the price spike will not derail its plan to slash emissions and has proposed a multi-billion-euro fund to help poorer households invest in green options.
“Let’s keep our eye on the ball. The problem here is the climate crisis,” EU climate policy chief Frans Timmermans said. “The quicker we move towards renewable energy, the quicker we can protect our citizens against high prices.”
[Edited by Alice Taylor]