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News 03 October 2022

EU countries agree on emergency measures to reduce energy prices


Following the European Commission’s proposals to tackle the current high energy and electricity prices, the Czech Presidency called for an Extraordinary Transport, Telecommunications and Energy Council meeting on the 30th of September. The session agreed on an official regulation proposal that attempts to “bring relief to European citizens and companies”, as stated by Josef Síkela, the Czech minister of industry and trade.

Regarding the much-discussed cap on market revenues for inframarginal technologies, the Council agreed on a cap at 180 euros/MWh (megawatt-hour) for electricity generators, including intermediaries that use inframarginal technologies to produce electricity, namely renewables, nuclear and lignite. Such operators have made extraordinary financial gains during the crisis, though the level of the cap was set in such a way that it attempts to preserve the profitability of the operators while avoiding hindering investments in renewable energies. Despite the mandatory nature of this measure, Member States will be allowed some flexibility in introducing their own measures on how to collect and redirect those sums of money towards supporting and protecting final electricity customers. Additionally, the Council added some exceptions to this specific measure, such as the technologies that directly compete with gas-fired power plants to offer flexibility to the electricity system. This measure is extraordinary and set to apply until 30 June 2023.

Electricity demand reduction was also discussed at the Council’s meeting. On this matter, the EU countries ultimately agreed to set a voluntary overall reduction target of 10% of gross electricity consumption and a mandatory reduction target of 5% of the electricity consumption in peak hours. Member States are given room to opt for the appropriate national measures to implement such measure. The Council also adopted a mandatory and temporary solidarity contribution on the profits of businesses active in the crude petroleum, natural gas, coal and refinery sectors with the view of bringing relief to households and companies.

Always in a bid to move away from Russian fossil fuels and lower consumer energy bills, political groups in the European Parliament announced a deal on last 27 September that will see the equivalent of €20 billion taken from the EU carbon market. The move, meant to be a short-term measure, will flood the carbon market with liquidity, send the price of carbon down, and ease pressure on electricity prices. The mechanism will stop once €20 billion are raised, an amount that will be taken from the Member State’s auctioning share.