The European Union will pursue radical measures to reduce electricity consumption and cap power prices in an emergency intervention to curb soaring energy costs that are sending shockwaves through the region’s economy.
(Bloomberg) — The European Union will pursue radical measures to reduce electricity consumption and cap power prices in an emergency intervention to curb soaring energy costs that are sending shockwaves through the region’s economy.
The EU’s executive arm plans to propose that the bloc’s 27 member states limit excessive revenues of companies producing power from sources other than gas and use the profits to support consumers, Commission President Ursula von der Leyen said. That would be done through imposing a price cap on electricity generated from technologies such as renewables, lignite or nuclear energy.
The unprecedented plan to step into energy markets also includes a levy on fossil-fuel producers, a price cap on Russian gas imports, measures to increase liquidity for energy companies if needed and a mandatory target reduction of electricity use. The EU is coming under mounting pressure to curb the spike in energy prices and avoid social upheaval as the heating season nears.
“We are confronted with astronomic electricity prices for households and companies and with enormous market volatility,” von der Leyen told reporters in Brussels on Wednesday. “Therefore, we will put forward a set of immediate measures that will protect vulnerable consumers and businesses and help them adapt.”
According to a draft regulation seen by Bloomberg News, the planned power price cap could be set at 200 euros ($198.07) per megawatt hours and would apply to revenues obtained by production of electricity from wind, solar and geothermal energy, hydropower, biomass, landfill gas, sewage treatment plan gas, biogas, nuclear, lignite and crude oilshale oil.
Shares in some of Europe’s biggest power producers rose Wednesday. Danish renewable power company Orsted A/S gained as much as 6.6%, Enel SpA rose 3.9% and Iberdrola SA rose as much as 4.2%. Credit Suisse senior analyst Jens Zimmermann said the EU price cap proposal “is high enough so as not to discourage future investment in non-gas producing technologies.”
The plan will be discussed with member states at an emergency meeting of EU energy ministers on Friday. Once it gets the political nod from governments, the commission will put forward legislative proposals that will include more details.
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The EU would also propose two demand reduction targets. The first would require governments to put in place measures that would cut overall electricity consumption from all consumers by 10% to 15%. The second would target the most expensive hours of production and would call for a mandatory cut of at least 5% in net consumption during peak hours, according to the draft.
The Czech Republic will try to exclude the issue of a possible price cap on Russian gas from the agenda for Friday’s energy ministers’ meeting, the Czech Trade and Industry Minister Jozef Sikela said Wednesday in Prague. Sikela, whose government will be charing the talks, said any cap would be a political tool, rather than a step that would solve the current energy crisis in Europe.
Russian President Vladimir Putin said Wednesday that a potential price cap on Russian gas and oil is “another stupidity.”
Von der Leyen also said Wednesday that the bloc will consider whether to include liquefied natural gas in the price caps, along with Russian gas imports — a move Poland has suggested.
“So what we are looking at now is that we stay competitive for the LNG suppliers, but we make sure that the prices we pay are not extraordinarily high, but in a decent range,” she said.
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