EU puts energy crisis steps on hold to address gas price cap

The European Union is set to pause efforts to approve a package of emergency measures to curb fallout from high natural gas prices as diplomats try to resolve a deep split over a push to cap the cost of gas.

Energy ministers holding an emergency meeting in Brussels agreed on the content of several emergency measures, but will delay formal approval until mid-December with a group of countries pushing to toughen the EU’s executive arm’s price-cap plan, according to two EU diplomats.  

“We can’t make a decision on anything as long as we can’t decide on everything,” Belgium’s energy minister, Tinne Van der Straeten, said ahead of Thursday’s meeting.

The diplomats were trying to reach an agreement on a package that includes strengthening a mechanism for joint gas purchases, limiting intraday price volatility, and enabling faster permitting for renewable energy projects. The language is agreed on those, the diplomats said.

EU energy ministers will hold another emergency meeting, likely on Dec. 13, the diplomats added.

The stakes are high: Failure to reach a deal would send a signal that the EU’s united response to the war-driven energy crisis is falling apart – a political gift for Moscow that Europe is keen to avoid.

In the background, another fight still festers: The bloc is bitterly divided about how to implement a Group of Seven-led plan to curb Russia’s oil revenues. EU diplomats failed to reach an accord after deliberations ran late into Wednesday night, but are optimistic a deal can be clinched as early as Thursday. 

The commission had come up with a proposal to cap the price of gas this week after repeated calls from a large group of member states – even amid concerns from other quarters that the move could endanger supply. The proposed emergency brake level of €275 per megawatt-hour is well above current levels, raising the question if it will ever be used, and has complicated Thursday’s meeting. 

“We expect the discussions today to be rather spicy,” Czech deputy prime minister Jozef Sikela told reporters ahead of the meeting.

In the days leading up to the gathering, Spain had derided the price-cap plan as a “mockery,” and France said the conditions were extreme.

The package discussed on Thursday includes:

  • A proposal for trading venues to be required to establish a new temporary intraday volatility management mechanism in electricity and gas derivatives by Jan. 31, 2023. To avoid unintended disruptions on markets for less liquid contracts, the tool should focus on front-month energy derivatives.
  • A common purchase platform to coordinate refilling of gas reserves. Member states would require their gas companies to take part in demand aggregation with volumes equal to at least 15 per cent of their storage-filling targets. Companies could form a European consortium to negotiate long-term contracts.

Separately, the European Commission set an intermediate target for use of gas in storage sites this the winter. By Feb. 1, the bloc’s inventories should be at least 45 per cent full even after high-demand winter months, to avoid depletion by the end of the winter season. If the winter is mild, the goal is to leave storage levels at 55 per cent by then.

© 2022 Bloomberg L.P.

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