Energy crisis in Europe: EU countries reject Spain’s calls for market intervention

In the face of an energy crisis that is driving up bills and fueling social discontent, EU countries have once again taken a precautionary approach to abide by current market rules and avoid any long-term damage, dealing a heavy blow to the public countryside of Spain from afar. – achieve reforms.

Gathered in Luxembourg for an extraordinary meeting, transport and energy ministers from the 27 member states put aside calls for reform from southern EU countries and instead opted for temporary and targeted measures to help vulnerable households and struggling businesses to weather the crisis, which is expected to last until April. .

This approach, based on remedies such as direct income support, state aid and tax cuts, is based on a toolbox released two weeks ago by the European Commission.

More than 20 Member States have already announced their intention to introduce some or all of these measures.

Spain, one of the most affected countries by the crisis, thinks that the toolbox “is not sufficient” and is made more and more heard in its demands for “extraordinary solutions” worthy of the “extraordinary context”.

Speaking to the press ahead of the ministerial meeting, Spain’s Energy Secretary of State Sara Aagesen Muñoz urged her colleagues to be “much more ambitious” and provide a “European response”, as opposed to the measures national laws proposed by Brussels and approved by a majority. Member States, which believe the crisis is temporary and driven by sudden global demand for natural gas that has not been met with the necessary supply.

Following this reflection, most EU countries prefer to stay away from forced market intervention that could cause lasting damage to the bloc’s integrated energy market.

“Transparent and competitive energy markets provide efficiency and competitive prices to end users”, a group of nine countries, led by Germany, written in a letter published ahead of Tuesday’s meeting. Sweden and Belgium subsequently expressed support for the joint statement.

“We cannot support any measure that conflicts with the internal gas and electricity market, for example, and ad hoc reform of the wholesale electricity market.”

Spain, however, is not giving up. The country released a new document outlining wide-ranging actions, including “decoupling” prices from the electricity market, a proposal previously supported by France, Greece, Romania and the Czech Republic.

Today, the EU’s wholesale electricity market operates on the basis of marginal pricing, also known as the “à la carte” market. In this system, all power producers – from fossil fuels to wind and solar – bid on the market and offer power according to their production costs. Auctions start with the cheapest resources – renewable energy – and end with the most expensive – usually natural gas.

Since most countries still depend on fossil fuels to meet all of their electricity demands, the final price of electricity is often set by the price of coal or natural gas. If gas becomes more expensive, electricity bills inevitably increase, although clean and cheaper sources also contribute to the total energy supply.

“Each +1 [euro/megawatt per hour] The increase in the price of natural gas represents 2.7 billion euros per year in additional electricity costs for all European consumers, diverting resources from the energy transition and economic recovery and it is getting worse every day “, indicates the Spanish document.

To avoid this “contagion effect”, Spain suggests that the total price of electricity be calculated as an average price of all the energy sources used in a country’s mix. He also wants a maximum ceiling to be set on the price of electricity produced from natural gas and the establishment of a centralized purchasing platform.

“In exceptional situations, member states should be allowed to tailor electricity price formation to their specific situations,” said Madrid, in an apparent call to temporarily exit EU energy rules.

In response, Kadri Simson, the European Commissioner for Energy, spoke in favor of the marginal pricing framework, describing it as the most effective method to ensure regular supplies, avoid blackouts, promote competitiveness and accelerate green transition.

“It is not entirely clear how a system with prices for different power sources would work in practice and whether it would be a better alternative to the current design,” Simson said Tuesday.

However, on Spain’s proposal to create a strategic gas reserve for the entire European Union, Simson seemed more willing to discuss at least the long-term idea. She pointed out that there were still too many unanswered questions, such as who would pay for gas transportation and storage.

“Many ministers have told us that we should not rush into rash decisions,” added the commissioner.

Speaking next to Simson, Slovenian Infrastructure Minister Jernej Vrtovec, who represented the rotating EU Council presidency, said the ministerial meeting left “no common position” on intervention in the market and that countries should instead focus on making the best use of the Commission’s toolbox.

“The [European] the economy as a whole depends on energy prices. It could also lead to the boom in all other products and services and endanger the viability of businesses, ”Vrtovec warned.

Vrtovec and Simson both insisted that the long-term solution to emerging from current and future energy crises is the European Green Deal and the path to carbon neutrality through the deployment of renewable energy systems. Switching to cleaner sources would make the EU more independent and resilient while reducing costs for consumers.

Last year, renewables have overtaken fossil fuels as the primary source of energy in the EU for the first time, generating 38% of electricity, compared to 37% for fossil fuels.

“The future energy mix must be balanced. There must be stable sources such as nuclear power, as a transition [energy] gas, and of course renewable sources – but it has to be balanced, and say, the path to decarbonization has to be perfectly planned, “Czech Deputy Prime Minister Karel Havlíček told Euronews after the meeting.

EU leaders will have another chance to debate rising energy prices at their next summit, scheduled for Brussels in mid-December. In the meantime, the course of action is fixed: temporary and nationally targeted solutions designed according to the economic and social circumstances of the country.

Edward K. Thompson