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The Commission will propose a cap on the price of non-gas energy. A gift for the power companies, however

According to the Financial Times, a draft proposal from Brussels intends to intervene on the worsening of the energy crisis by placing a ceiling on the price of electricity generated by producers of electricity not using natural gas. The European Commission has urged Member States to set a ceiling of € 200 per megawatt hour for electricity produced by wind farms, nuclear reactors and coal-fired power plants, all of which do not use natural gas.

The application of such a price cap would lead to " market results that might be expected when global supply chains are functioning normally and are not subject to the militarization of energy through disruptions in gas supplies ," the Commission said. in the draft proposal.

FT pointed out that wholesale electricity prices in Germany have skyrocketed because they are pegged to natural gas, even though some of the electricity is generated from other sources.

The draft also says EU members are expected to cut electricity consumption by at least 5% during peak hours, in an energy crisis that worsens by the week. The EU's plan to recover excess profits from electricity generation that does not rely on natural gas to help consumers pay their bills was also mentioned.

Russia's latest move against Europe was the closure of the Nord Stream 1 pipeline. Moscow said the critical NatGas pipeline was closed. Moscow has declared that the NatGas pipeline, crucial for Europe, will not be reopened until the "collective West" has lifted the sanctions against Russia for the invasion of Ukraine.

EU energy ministers will meet on Friday to discuss the historic intervention in the energy market.

"A leaked EU draft proposal includes a cap on electricity prices for intra-marginal profits … If true, we would see it as a better-than-expected outcome for generation companies," Jefferies analysts wrote in a statement. .

Following the news, utility and renewable energy stocks rose in Europe.

Credit Suisse senior analyst Jens Zimmermann said the draft proposal looks positive for utilities, such as “RWE”.

Even with a price cap, upward revisions in EPS have become more likely, as RWE's consensus forecasts have never been based on recent star electricity prices ,” Zimmermann said. Fernando Garcia, an analyst at RBC, said the electricity price gap " is quite large, clearly above the leveled cost of electricity " and could be high enough not to discourage future investments in non-NatGas generators.

It seems that it was mainly Italy and Spain who asked for this solution. In Germany we can see that the current situation, with prices per KW / h around 400 euros for delivery the next day, is perfectly fine …

However, the problem remains: a large portion of the electricity of various European countries (Italy in the lead) is produced with natural gas. Given that you cannot order the wind to blow, the sun to shine and the rain to fall and fill the dams, just as you cannot convert a gas plant to a coal plant from today to tomorrow, it is evident that on the one hand we will have an imported portion of companies or households, however, it will be burdened by the burden of generation from imported gas. Certainly there will be a strong incentive, given the price difference, to lower the peaks and we will find ourselves with heavy marginal electricity tariffs, probably multi-hourly, which will greatly complicate the lives of citizens. Furthermore, if we look at the German case, the remuneration for renewable components stabilizes at a high level, the investment of which had already been decided with very different prices and which therefore, in any case, become super profitable for the electricity companies!


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The article The Commission will propose a cap on the price of non-gas energy. A gift for electricity companies, however, comes from ScenariEconomici.it .


This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/la-commissione-proporra-un-tetto-al-prezzo-dellenergia-non-proveniente-dal-gas-un-regalo-per-le-societa-elettriche-comunque/ on Wed, 07 Sep 2022 15:45:55 +0000.