The European Commission admitted on Thursday that “many member states have doubts” about the proposed mechanism to ban transactions from 275 euros per megawatt hour (MWh) on the main European gas exchange Natural under strict conditions.
“We are ready to facilitate an agreement and of course we are here to help the presidency [checa da União Europeia] take away all concerns, but in fact many member states have concerns” about the market correction mechanism intended to limit excessive gas price spikes, European Energy Commissioner Kadri Simson admitted in Brussels.
Speaking about the arrival of an extraordinary meeting of ministers responsible for the European Union (EU) on the proposal presented by the community’s executive on Tuesday, the official noted that “so far, all the different positions have finally made it possible made to make arrangements”.
“I hope this time will be no different,” added Kadri Simson.
Emphasizing that “this is an extraordinary proposal”, the European Commissioner noted that “the times are also very difficult” because “maybe [a UE] need this tool as it enters a new period in which gas prices reach extraordinarily high levels.”
EU energy ministers are today debating the European Commission’s proposal presented on Tuesday about a last resort that, if ever activated, will act as a “safety cap” on gas prices on Europe’s main exchange.
In this, the first discussion of the proposal, an agreement is not expected given the opposition of countries such as Germany and Spain, and the Spanish government has even classified this market correction mechanism as “a joke” and “not a proposal”.
It involves a “last resort” to deal with situations of excessive natural gas prices, setting a maximum dynamic price at which natural gas transactions can take place one month in advance on the markets of TTF, the main European natural gas exchange.
The European Commission’s proposal therefore provides a temporary “safety ceiling” to control gas prices in the TTF, this limit will have to be monitored permanently and will only be activated under two conditions: prices above 275 euros for two weeks and when the value is 58 euros higher than the reference price for liquid natural gas (LNG) produced during 10 trading days.
Despite the fact that natural gas prices have been between €5 MWh and €35 MWh over the last decade, the values negotiated a month ahead in the TTF have been above €200/MWh in recent months and peaked at almost €314 last August /MWh. But even then, the correction mechanism now proposed could not have been activated, as the two conditions set by Brussels had not been met.
The executive wants to continue with this temporary mechanism to limit prices in the TTF, which plays a fundamental role in the European wholesale gas market, while working on a new supplementary reference index, which will be presented in early 2023 to conditions of the European market, such as the use of LNG.
Today, EU energy ministers will try to agree on two emergency measures previously proposed by the Commission to tackle the ongoing energy crisis, one on strengthening solidarity through better coordination of gas purchases, cross-border exchanges and reliable reference, and one on others about speeding up permitting procedures for sustainable energy projects.
Geopolitical tensions as a result of the war in Ukraine are affecting the European energy market.
Source: DN
