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EU seeks solution for soaring electricity prices

Spain wants EU Council deeds, not words
EUROPEAN COUNCIL
EU Energy Commissioner Kadri Simson gives a press conference following the Informal meeting of Energy and Transport Ministers, in Kranj, Slovenia, September 22, 2021.

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As electricity prices increase across the EU, the bloc’s energy and transport ministers met in Slovenia this week to discuss measures to help lower the energy transition cost and keep prices in check. Despite concerns that high power surges could delay plans for energy transition across the European Union, Energy Commissioner Kadri Simson put up a brave face, telling ministers on September 22 in the long run, the solution is more renewables and more energy efficiency.

The increase in electricity prices is creating a lot of concerns and debate in Europe. An EU official told New Europe on September 22 the Council does not have a common position on the current increase of energy prices. “More generally however, social impacts and addressing energy poverty is regularly mentioned in Council conclusions or common positions, when discussing energy policy,” the EU official said. “The issue of current energy prices was raised at yesterday’s (September 21) General Affairs Council, a member state, supported by others asked it to be added to the agenda of the upcoming European Council meeting on October 21-22. This will be for the President of the European Council to decide,” the EU official said, referring to the Spanish government’s request to include a European debate on the energy market in the Council’s agenda due to the increase in electricity prices.

In Spain, wholesale electricity prices have more than trebled since December, sparking a political blame game, Reuters reported, adding that the government moved last week to cap prices and limit power companies’ profits.

On September 21, Spain’s Economy Minister Nadia Calvino and Energy and Environment Minister Teresa Ribera sent a letter to the EU Commission, saying member states should not need to improvise ad hoc measures every time markets malfunction. Spain’s proposals include restricting the participation of certain traders in the EU carbon market, warning of the risk that “financial speculation rather than real factors drives prices up too quickly,” Reuters reported. They also called for the establishment of a centralised European platform to buy gas and start to build up strategic gas reserves, countering the bloc’s exposure to fluctuating international markets.

Simson told a press conference on September 22 the EU has to lessen its dependence on imported fossil fuels. “Today’s situation underlines that we have to end our dependence on foreign volatile fossil fossils fuels as soon as possible. We also need to take energy efficiency seriously,” she said.

In July, the Commission proposed the historic Fit for 55 package to deliver the Green Deal, which Simson discussed with the national energy ministers on September 22. “I know that for my colleagues in the Member States, this is a challenging collection of measures. The size of the package is unprecedented and the proposals are strongly interlinked, not to mention the overall ambition to deliver a 55% cut in emissions by 2030 and climate neutrality by 2050,” the EU Energy Commissioner said. “But we have all together agreed to achieve these objectives, as we know that there is no alternative – we are already beginning to see the cost of inaction in Europe and around the globe and it is steep. Now is the time to deliver what we have committed to,” he added.

The July package included two dedicated energy proposals: updating the renewable energy and energy efficiency directives. “Getting to our new climate goals of course means ramping up the energy targets as well: We need 40% of renewables in our energy mix by 2030, not 32% as is the current objective. And we need to save 9% more energy than we would with our current plans,” Simson said. “With the Renewable Energy Directive revision, the EU provides a complete framework for renewable deployment. We are in particular focusing on areas where progress remains moderate: buildings, industry, and transport,” she added.

According to Simson and EU Transport Commissioner Adina Valean electrifying the European transport sector is one of the keys to the EU’s success.

Reaching net zero does not only require green energy, but also using less energy overall. “In addition to the new EU headline energy efficiency target, we propose to increase the annual energy savings obligation to 1.5%. Each Member State will be able to focus on the sectors with the biggest energy efficiency potential, be it housing or industry,” Simson said, arguing that the EU’s renewables and energy efficiency policy in the context of what is currently happening on the EU energy markets.

Simson said a combination of factors, but mostly high natural gas prices and the increasing post-crisis demand, caused electricity prices to increase across the EU. “This is a global development, with most countries affected, regardless of their location or market arrangements,” she said.

The European Commission is facing calls to investigate Gazprom, after Members of the European Parliament reportedly sent a letter on September 16 to Simson and the EU’s anti-trust chief Margrethe Vestager, saying they suspected the Russian gas giant of market manipulation.

However, Simson said that regardless of the temporary hike of the electricity prices, in the long run, the solution is clear: “We need more renewables and we need to improve our energy efficiency. Renewables are already today in the EU usually the cheapest source of power. We must keep investing in wind and solar to make affordable green energy available to all. Today’s situation underlines that we have to end our dependence on foreign, volatile fossil fuels as soon as possible,” the EU Energy Commissioner said. “We also need to take energy efficiency seriously. It is the only real solution to energy poverty and the best antidote to growing energy bills – using less energy means paying for less energy. Now is a good time to take advantage of the available EU and domestic recovery funds and prioritize renovation and other energy efficiency measures,” she said.

As part of the July package, the EU Commission has proposed the new Social Climate Fund that would use the ETS revenues to balance the impact of the energy prices, providing funding for renovation and renewables projects as well as direct support to consumers.

Focusing on the Mediterranean region, Constantinos Filis, director of research at Institute of International Relations, told New Europe in Athens, Greece, the big challenge for the countries’ turn to green energy and a green economy is the cost. “As long as the costs remain high, there are second thoughts as we saw for instance in Germany. In the first half of 2021 there was more use of the so-called dirty energy than greener forms of energy for the whole of Germany which is discouraging,” Filis said, adding, “The same goes with the drastic rise of natural gas gas prices, of energy prices in a period when we thought we wouldn’t face that challenge of the cost as we have secured a long-term low price for the European market”.

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

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