European Union leaders will discuss the energy crisis caused by Russia’s war in Ukraine at a meeting of the European Council in Brussels on Thursday and Friday.
“The focal point of our agenda is the energy crisis,” said European Council President Charles Michel in his invitation letters to EU leaders on Tuesday.
“EU leaders will assess the state of energy prices and security of supply, including market optimization measures and progress on demand reduction. They will also decide on any further action that needs to be taken,” said the council president, adding the meeting will follow up on an informal European Council meeting held on Oct. 7 in Prague, the Czech Republic, which currently holds the EU’s rotating presidency.
The focus of the discussions will be reducing electricity demand, enhancing the security of supplies, and guaranteeing affordable prices for households and businesses.
Michel said they “must act with the utmost urgency” on the energy crisis, adding: “We must imperatively intensify our three lines of action: reducing demand, ensuring security of supply, and containing prices.”
The leaders at the meeting will also discuss measures to reduce prices by “fully capitalizing on the negotiating clout of our unity at 27 (members) by jointly purchasing gas, developing a new benchmark that more accurately reflects conditions on the gas market, and examining a temporary dynamic price limit,” he said.
“I also expect us to address other short- and long-term market interventions, such as an EU framework to cap the price of gas for electricity generation.”
Michel noted that although member states have different national constraints, he is confident that discussions will be constructive and mindful of the bloc’s “urgent collective interest.”
– EU to enable consortiums for gas purchases
Following up on Michel’s remarks on using the EU’s “negotiating clout” to bring down prices, the EU on Tuesday said it would enable energy companies to set up consortiums for gas purchases.
“We know that Europe’s energy demand is very large. So it is logical that instead of outbidding each other, the member states and the energy companies should leverage their joint purchasing power, and for that, we propose today legal tools for pooling energy demand at the European level,” European Commission President Ursula von der Leyen told a press conference, outlining a package of new measures to address high energy prices and ensure the security of supplies.
“We’re also enabling energy companies to set up a gas purchase consortium so that they are together able to purchase gas,” she said, adding the aggregation of demand will be mandatory for at least 15% of the volume needed to fill this storage.
Last year, she said, European energy companies were outbidding each other in the spot market and “driving the crisis up.”
Von der Leyen said solidarity is crucial in order for EU countries to be prepared “in case of a full gas and electricity disruption.”
Default rules will be established on solidarity among EU countries that apply in case of disruption when there is no bilateral agreement in place, said von der Leyen.
“We need to tame the (energy market) volatility,” she said, adding: “The current pricing benchmark is no longer adapted to a market that is shifting from pipeline gas to LNG.”
“We will develop a new benchmark and put in place a mechanism to limit excessive gas prices in the meantime.”
– Informal European Council outcome
At an informal European Council meeting earlier this month, however, the leaders were unable to find common ground on capping gas prices to mitigate the energy crisis. They only showed support for setting up joint gas procurement measures by the end of the winter to avoid outbidding each other in markets.
Before the meeting, von der Leyen proposed a “roadmap” to the leaders to limit rising energy bills by capping the market price of imported natural gas and reforming the European electricity market.
The leaders discussed a plan on a so-called “corridor for decent prices with reliable partners” on limiting the price of natural gas as well as another option to “take out the peaks and speculation” from the broader market prices, she said after the summit.
As part of an overall reform of the EU market, they also talked about possibilities to curb or decouple the price of gas used to generate electricity. This came after the demand of 15 EU countries, including Spain, France and Italy.
Under the current rules, high gas prices have had an inflationary effect on final electricity bills which is based on the price of the last and most expensive energy source and does not reflect the lower costs of renewables or nuclear power.
Von der Leyen promised that the EU executive body would come with more detailed proposals on the subject in the coming weeks.
Referring to Germany’s recently announced €200 billion ($197 billion) energy support package which critics have said is against EU competition rules, she said: “We have to keep our single market together and we have to avoid fragmentation.”
“The bloc’s single market has proven to be our single best asset in times of crisis,” she added, underlining that it must be preserved by assuring a level playing field and avoiding “fragmentation and dispersion.”
The European Commission will look into new ways to support European consumers through already existing funds, von der Leyen said.
-AA