Great distributor - Newspaper Kommersant No. 169 (7370) of 09/14/2022

Great distributor - Newspaper Kommersant No. 169 (7370) of 09/14/2022



The European Commission has tentatively decided not to fundamentally change the structure of the gas and energy markets, including temporarily abandoning the potential cap on gas and electricity prices. Instead, to overcome the energy crisis, the European Commission proposes to impose a tax on excess profits of generating companies, the income from which should be redirected to support the most vulnerable consumers, as well as mandatory restrictions for EU countries on electricity consumption during peak hours.

The EU will propose higher taxes on renewables, nuclear power plants and hydroelectric power plants to combat the sharp rise in electricity prices, Reuters reports citing the materials of the European Commission. The collected funds will be allocated by the government in the form of subsidies to reduce household and industry payments for electricity.

The European Commission will present its proposals on September 14, after discussion, it is possible that the proposals will be approved at a meeting of energy ministers on September 30.

The proposal to introduce a cap price on gas from the Russian Federation, apparently, will not yet be included in the list of measures to overcome the energy crisis, although the EU is in no hurry to completely abandon this idea.

Hungary and Austria have previously opposed such an approach, fearing that Moscow would retaliate by completely cutting off gas supplies to the EU. Italy and Greece are the biggest proponents of capping gas prices. As European Commissioner for Energy Kadri Simson said on September 13, the European Commission is not yet ready for this step. “As for the price ceiling for Russian gas, the European Commission needs to do more work to evaluate it,” she said. According to her, the European Commission also needs to further develop a proposal to introduce a ceiling on LNG prices in the EU countries.

Wholesale electricity prices in the EU are formed by the closing supply - now it is primarily the expensive generation of gas-fired power plants. At the same time, TPPs that do not run on gas sell electricity at the same price, although they do not spend the same amount on fuel. In this regard, after a record increase in electricity prices, a number of European politicians have proposed reforming the electricity market by "untethering" electricity prices from gas prices, as well as introducing restrictions on the maximum price of energy.

But the EU has so far abandoned this path.

Brussels intends withdraw any excess revenues that wind, solar, nuclear and other types of generation (with the exception of gas and coal, whose costs are also high) receive in the current situation.

This measure provides for capping the price per megawatt-hour of revenue. Thus, the revenue cap for electricity producers not using gas could be set at €180 per MWh, which is lower than the €200 per MWh proposed in the previous project and less than half of the current market price for electricity . For example, in Germany in August the price of electricity exceeded €1,000 per 1 MWh, now it is about €460 per 1 MWh.

In addition, EU countries may introduce a temporary windfall tax for oil, gas, coal and refinery companies operating in the EU. According to Reuters, the additional tax will amount to 33% of "the taxable incremental profits of these firms earned in fiscal year 2022." Brussels will set a minimum rate for all EU countries, but individual governments can increase it.

The European Commission's bill sets a binding target to reduce electricity consumption this winter for all EU countries. Thus, the European Commission proposes to reduce electricity consumption by 5% during peak demand hours - this will reduce the need to turn on expensive gas generation and thereby reduce overall energy prices. EU countries already accepted decision to reduce gas consumption by an average of 15% this winter. Stocks in UGS facilities in the EU now reach 84%.

The European Commission also proposes to allocate additional funds to energy companies in the form of state guarantees so that they can hedge their positions in the gas and electricity markets through financial instruments and have sufficient liquidity for this. The governments of Germany, Sweden and Finland have already allocated tens of billions of euros to their companies for this purpose. Norwegian gas company Equinor estimated the amount of funds needed by EU gas market players to maintain their margined positions in derivatives at a “minimum” of €1.5 trillion.

Tatyana Dyatel



Source link