EU Proposes Caps on Power Prices and Consumption to Ride Out Winter Energy Crisis By Investing.com
Economy 17 minutes ago (Sep 07, 2022 14:18)
By Geoffrey Smith
Investing.com — Europe stepped up its preparations for a winter without Russian energy supplies on Wednesday, proposing price caps and demand suppression for electricity, along with a price cap on imports of Russian natural gas.
Speaking two days ahead of a meeting of EU energy ministers, European Commission President Ursula von der Leyen laid out five proposals to address the looming crisis.
The proposals, which will need the approval of the EU’s member states to take effect are:
1. A mandatory target for cutting electricity demand at peak hours, which typically generate the highest prices.
2. A cap on revenues for non-fossil fuel power generators, restricting the scope of renewable generators and hydropower companies to make excess profits as ‘price-takers’ on a wholesale market where reference prices are usually set by the price of gas-powered electricity.
3. A “solidarity contribution” (in other words, windfall taxes) levied on the excess profits of fossil fuel companies.
4. Liquidity support for participants in the bloc’s power markets, who have been hit with a massive rise in collateral requirements as the price of their future buying commitments has exploded. This will include a temporary relaxation of the EU’s state aid rules.
5. A cap on the price of natural gas imports from Russia.
“The objective here is very clear,” von der Leyen said. “We must cut Russia’s revenues which Putin uses to finance this atrocious war against Ukraine.”
The measures represent another escalation in the ‘energy war’ between Russia and Europe that was triggered by Russia’s invasion of Ukraine in February. They come only days after G-7 ministers agreed to impose a price cap on Russian oil exports, trusting to western dominance of maritime insurance markets to enforce it. Russia had suspended all shipments of natural gas to Germany through the Nord Stream pipeline as a result, raising the likelihood that Europe will have to get through the coming winter without any supplies of Russian gas.
Russian President Vladimir Putin raised the stakes again earlier on Wednesday, telling a conference in Vladivostok in Russia’s Far East that the country would not supply any fuel of any sort to Europe if it tried to impose a price cap on its gas exports.
“Will there be any political decisions that contradict the contracts? Yes, we just won’t fulfil them. We will not supply anything at all if it contradicts our interests,” Reuters quoted Putin as saying. “We will not supply gas, oil, coal, heating oil – we will not supply anything.”
Europe usually imports about 40% of its gas and 30% of its oil from Russia.
Von der Leyen noted that the small amounts of Russian gas still reaching the EU, chiefly through the Yamal-Europe pipeline, represent only 9% of current imports. The bloc has also made better progress than first seemed likely in filling its storage facilities ahead of the peak winter demand season. According to data from Gas Infrastructure Europe, they are now 82% full, having reached the Commission’s 80% target almost two months ahead of schedule.
EU Proposes Caps on Power Prices and Consumption to Ride Out Winter Energy Crisis
By Andrew MacAskill and Humza Jilani LONDON (Reuters) – The new British Prime Minister Liz Truss has selected a cabinet where for the first time a white man will not hold one of…
By Alistair Smout and William James LONDON (Reuters) -British Prime Minister Liz Truss said she would set out plans to tackle soaring energy bills on Thursday but would not impose…
By Kevin Buckland and Alun John TOKYO/LONDON (Reuters) – The dollar was lord of all it surveyed on Wednesday, at a fresh 24-year peak on the rate-sensitive yen and retesting multi…
© 2007-2022 Fusion Media Limited. All Rights Reserved.
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.