The European Union (EU) Commission will look into all possible options for emergency measures to limit the contagion effect of gas prices in electricity prices, such as temporary price limits to address the skyrocketing energy prices due to the ongoing Russia-Ukraine conflict.
It will also assess options to optimise the electricity market design, taking into account the final report of the EU Agency for the Cooperation of Energy Regulators (ACER) and other contributions on benefits and drawbacks of alternative pricing mechanisms to keep electricity affordable, without disrupting supply and further investment in the green transition.
As such, the commission has presented member states with additional guidance, confirming the possibility to regulate prices in exceptional circumstances, and setting out how member states can redistribute revenue from high energy sector profits and emissions trading to consumers.
EU State Aid rules also offer members options to provide short-term support to companies affected by high energy prices and help reduce their exposure to energy price volatility in the medium to long term.
Following a consultation on targeted amendments to the Emission Trading System State Aid Guidelines, the commission said it will also be consulting with member states on the needs for and scope of a new State aid Temporary Crisis Framework to grant aid to companies affected by the crisis, in particular those facing high energy costs.
Eliminating dependence on Russian gas before 2030
“Phasing out our dependence on fossil fuels from Russia can be done well before 2030. To do so, the commission proposes to develop a REPowerEU plan that will increase the resilience of the EU-wide energy system based on two pillars: Diversifying gas supplies, via higher Liquefied Natural Gas (LNG) and pipeline imports from non-Russian suppliers, and larger volumes of biomethane and renewable hydrogen production and imports; and, reducing faster the use of fossil fuels in our homes, buildings, industry, and power system, by boosting energy efficiency, increasing renewables and electrification, and addressing infrastructure bottlenecks,”it said.
Full implementation of the EU Commission’s ‘Fit for 55′ proposals would already reduce its annual fossil gas consumption by 30 percent, equivalent to 100 billion cubic metres (bcm), by 2030.
With the measures in the REPowerEU plan, EU could gradually remove at least 155 bcm of fossil gas use, which is equivalent to the volume imported from Russia in 2021. Nearly two thirds of that reduction can be achieved within a year, ending the EU’s overdependence on a single supplier.
The commission also proposes to work with member states to identify the most suitable projects to meet these objectives, building on the extensive work done already on national Recovery and Resilience Plans.
This plan outlines a series of measures to respond to rising energy prices in Europe and to replenish gas stocks for next winter. Europe has been facing increased energy prices for several months, but now uncertainty on supply is exacerbating the problem. REPowerEU will seek to diversify gas supplies, speed up the roll-out of renewable gases and replace gas in heating and power generation. This can reduce EU demand for Russian gas by two thirds before the end of the year.
Commission President Ursula von der Leyen said: “We must become independent from Russian oil, coal and gas. We simply cannot rely on a supplier who explicitly threatens us. We need to act now to mitigate the impact of rising energy prices, diversify our gas supply for next winter and accelerate the clean energy transition.
“The quicker we switch to renewables and hydrogen, combined with more energy efficiency, the quicker we will be truly independent and master our energy system. I will be discussing the Commission’s ideas with European leaders at Versailles later this week, and then working to swiftly implement them with my team.”
Executive vice-president for the European Green Deal, Frans Timmermans said: “It is time we tackle our vulnerabilities and rapidly become more independent in our energy choices. Let’s dash into renewable energy at lightning speed. Renewables are a cheap, clean, and potentially endless source of energy and instead of funding the fossil fuel industry elsewhere, they create jobs here. Putin’s war in Ukraine demonstrates the urgency of accelerating our clean energy transition.”