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EU Commission toolbox of measures to tackle high energy prices

EUROPEAN UNION, 2021/EC - AUDIOVISUAL SERVICE/JENNIFER JACQUEMART
EU Energy Commissioner Kadri Simson and Financial Stability, Financial Services and the Capital Markets Union Commissioner Mairead McGuinness at the European Commission headquarters in Berlaymont, Brussels, October 13, 2021

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The European Commission proposed on October 13 a package of measures to help shield European consumers from the storm of rising energy prices.

The Commission said it adopted a Communication on Energy Prices, to tackle the exceptional rise in global energy prices, which is projected to last through the winter, and help Europe’s people and businesses.

The Communication includes a “toolbox” that the EU and its Member States can use to address the immediate impact of current prices increases, and further strengthen resilience against future shocks, the Commission said, adding that short-term national measures include emergency income support to households, state aid for companies, and targeted tax reductions.

The Commission will also support investments in renewable energy and energy efficiency; examine possible measures on energy storage and purchasing of gas reserves; and assess the current electricity market design.

“Rising global energy prices are a serious concern for the EU,” Energy Commissioner Kadri Simson said presenting the toolbox. “As we emerge from the pandemic and begin our economic recovery, it is important to protect vulnerable consumers and support European companies,” she added.

Simson noted that the Commission is helping Member States to take immediate measures to reduce the impact on households and businesses this winter. “At the same time, we identify other medium-term measures to ensure that our energy system is more resilient and more flexible to withstand any future volatility throughout the transition. The current situation is exceptional, and the internal energy market has served us well for the past 20 years. But we need to be sure that it continues to do so in the future, delivering on the European Green Deal, boosting our energy independence and meeting our climate goals,” she said.

The Commission stressed that the current price spike requires a rapid and coordinated response. The existing legal framework enables the EU and its Member States to take action to address the immediate impacts on consumers and businesses, it said.

“Priority should be given to targeted measures that can rapidly mitigate the impact of price rises for vulnerable consumers and small businesses. These measures should be easily adjustable in the Spring, when the situation is expected to stabilise. Our long-term transition and investments in cleaner energy sources should not be disrupted,” the Commission said in a press release.

The Commission noted that immediate measures are needed to protect consumers and businesses. It said member states should provide emergency income support for energy-poor consumers, for example through vouchers or partial bill payments, which can be supported with EU ETS revenues, authorise temporary deferrals of bill payments,

put in place safeguards to avoid disconnections from the grid, provide temporary, targeted reductions in taxation rates for vulnerable households, provide aid to companies or industries, in line with EU state aid rules, enhance international energy outreach to ensure the transparency, liquidity and flexibility of international markets, investigate possible anti-competitive behaviour in the energy market and ask the European Securities and Markets Authority (ESMA) to further enhance monitoring of developments in the carbon market, and facilitate a wider access to renewable power purchase agreements and support them via flanking measures.

According to the Commission, the clean energy transition is the best insurance against price shocks in the future and needs to be accelerated. “The EU will continue to develop an efficient energy system with high share of renewable energy. While cheaper renewables play an increasing role in supplying the electricity grid and setting the price, other energy sources, including gas, are still required in times of higher demand. Under the current market design gas still sets the overall electricity price when it is deployed as all producers receive the same price for the same product when it enters the grid – electricity, the Commission said. “There is general consensus that the current marginal pricing model is the most efficient one, but further analysis is warranted. The crisis has also drawn attention to the importance of storage for the functioning of the EU gas market. The EU currently has storage capacity for more than 20% of its annual gas use, but not all Member States have storage facilities and their use and obligations to maintain them vary,” it added.

The Commission also called for medium-term measures for a decarbonised and resilient energy system. Member states should step up investments in renewables, renovations and energy efficiency and speed up renewables auctions and permitting processes, develop energy storage capacity, to support the evolving renewables share, including batteries and hydrogen, ask European energy regulators (ACER) to study the benefits and drawbacks of the existing electricity market design and propose recommendations to the Commission where relevant, consider revising the security of supply regulation to ensure a better use and functioning of gas storage in Europe, explore the potential benefits of voluntary joint procurement by Member States of gas stocks, set up new cross-border regional gas risk groups to analyse risks and advise Member States on the design of their national preventive and emergency action plans, boost the role of consumers in the energy market, by empowering them to choose and change suppliers, generate their own electricity, and join energy communities.

The measures set out in the toolbox will help to provide a timely response to the current energy price spikes, which are the consequence of an exceptional global situation. They will also contribute to an affordable, just and sustainable energy transition for Europe, and greater energy independence. Investments in renewable energy and energy efficiency will not only reduce dependence on imported fossil fuels, but also provide more affordable wholesale energy prices that are more resilient to global supply constraints. The clean energy transition is the best insurance against price shocks like this in the in the future, and needs to be accelerated, also for the sake of the climate.

BEUC, the European Consumer Organisation, welcomed the Commission’s toolbox of measures to tackle the impact of high energy prices.

“We’ve seen staggering increases in energy prices recently,” BEUC Director General Monique Goyens said. “As we head into winter and start to spend more on heating our homes, it’s consumers who are in the eye of the storm, having to pick up the bill for market forces totally beyond their control. This comes on the back of the COVID-19 crisis which has caused financial difficulties for many consumers and when 10% of people in the EU are already in energy poverty,” she said, adding that the European Commission has heard consumer groups’ concerns and has come forward with some ambitious proposals.

“The Commission has issued strong, consumer-centric recommendations. Now we need to see urgent action from national governments to follow through on this ambition, implement these measures and protect consumers from these rapid price rises. Looking ahead, we need to depart from our energy dependency on fossil fuels and the volatile global markets that expose consumers to price spikes. There is no better way to do that than to accelerate the shift to renewables,” Goyens said, adding that policy-makers should accelerate this shift. Only this will guarantee both affordable energy to European consumers and reductions in carbon emissions.

WindEurope CEO Giles Dickson said on October 14 the European Commission have singled out PPAs as a key part of their “toolbox” of measures to tackle the current situation in energy markets. “They’ve underlined how PPAs help ensure stable and affordable electricity prices for Europe’s businesses. And they’ve proposed a raft of measures to facilitate PPAs. RE-Source 2021 has them all: matchmaking, experience sharing or standard PPA contracts – RE-Source 2021 is your go-to place if you want to source cheap and reliable renewable electricity,” he said.

SolarPower Europe CEO Walburga Hemetsberger added that the current energy price crisis demonstrates the urgent need for businesses to invest in reliable, low-cost renewable electricity. “The European Commission has recognised the strategic importance of renewable Power Purchase Agreements for the continent and we look forward to the Commission’s additional guidance on PPA frameworks to Member States before 2023. The good news is that PPAs and on-site sourcing is booming in Europe, for yet another record-breaking year. We can go even further and faster by accelerating the development of regulatory frameworks for PPAs, taking enabling measures like standardised contracts and creating incentives for end-users,” she said.

Simson will present the Communication and toolbox to Members of the European Parliament on October 14 and to Energy Ministers on October 26. European Leaders are then due to discuss energy prices at the upcoming European Council on October 21-22.

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Co-founder / Director of Energy & Climate Policy and Security at NE Global Media

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