[ANALYSIS] EU Energy Ministers’ meeting on Friday

Analysis details (06:30)

OVERVIEW: “EU energy ministers will seek a political agreement on a proposal for a Council Regulation on an emergency intervention to address high energy prices”, according to the European Commission (EC) release. This comes as the squeeze in natural gas spurred a parabolic rise in energy prices recently, in turn, pushing costs for firms and households. Since then, power prices have come off highs, but vulnerabilities within the market remain.

SCHEDULE:

• 07:15BST/02:15EDT – Arrivals


• 13:00BST/08:00EDT – Press Conference

Debates will be held in private.

AGENDA:

ENERGY MEASURES: “EU energy ministers will try to reach a political agreement on a proposal for a Council Regulation on an emergency intervention to address high energy prices”, the EC said in a statement. According to a senior EU official, countries have expressed support for the broad compromise on EU measures.

The proposals unveiled on September 14th (via the EC) included:

1. A voluntary overall reduction target of 10% of gross electricity consumption, and a mandatory reduction target of at least 5% of the electricity consumption during peak hours, are to be determined by member states – ministers will discuss whether measures to further cut gas demand is needed. This comes as leaders attempt to balance consumption with storage.
   


2. A cap the market revenues at 180 euros/MWh for electricity generators that use so-called inframarginal technologies to produce electricity, such as renewables, nuclear and lignite - The proposal allows member states to choose how to redirect the surplus revenues towards measures in support of final electricity consumers.
   


3. The introduction of an exceptional and temporary solidarity contribution to tackle the surplus profits of the fossil fuel sector. The solidarity contributions would be redistributed to provide support to households and SMEs.

The EC said the measures proposed are exceptional and temporary.

“The outcome of the political agreement will then be formally adopted by member states by written procedure, possibly in view of the informal European Council in Prague on 7 October 2022 and will enter into force on the day following its publication in the Official Journal of the European Union”, according to the European Commission release.

PRICE CAP: “Ministers will then hold an exchange of views on further policy options to mitigate high gas prices”, the EC said. It has been confirmed that the Commission will not be putting a proposal to cap gas prices on the table for the emergency meeting, with heavyweights Germany, Netherlands and Denmark opposed to the idea, although most states are calling for such a cap. However, options will be discussed, with a Senior EU official suggesting the Commission is ready to propose an alternative gas price benchmark to Dutch TTF. The Commission will also propose an extension of crisis staid aid rules in mid-October, according to the Senior EU official. Desks have downplayed the chances of a breakthrough on this front.

NORD STREAM: Finally, Denmark will inform ministers of the recent gas leaks in the Nord Stream 1 and 2 pipelines near the island of Bornholm in Denmark. This follows what has been deemed as sabotage on the gas pipelines connecting Russia to Europe, with investigations still ongoing as to the perpetrator. A blame game has commenced on this front, but the issue of energy security remains.

OTHER TALKS: EU ambassadors are also due to meet to discuss how a proposed Russian oil cap can be rolled out. On this front. The mechanics of a Russian oil cap will see shipping and insurance firms banned from dealing with Russian oil if the price is higher than what is currently being sold in Asia (~30% discount vs Europe). Other G7 allies will impose similar sanctions – “The idea is that even if they don’t officially subscribe to the cap, countries such as China and India would have no incentive to pay more for the Russian oil.”, Politico explains. The EU will also compensate (under a tentative agreement) countries such as Cyrus and Greece whose shipping sector will be hit by the cap – eyes will be on the reactions of these two countries to the proposed plans.

NOTE: The EU energy meeting will be taking place as Russia prepares to formally annex four regions of Ukraine that underwent what the West has labelled “sham referenda”. The guided time for the EC presser (13:00BST/08:00EDT) will coincide with a potential speech by Russian President Putin – Newsquawk's analysis on this can be found here.

30 Sep 2022 - 06:30- EnergyGeopolitical- Source: Newsquawk