All the proposals of the EU Commission on electricity and gas
What is the European Commission proposing on electricity and gas? The comment – on Twitter – by Simona Benedettini , expert in energy markets
What are the indications in yesterday's letter to the Heads of State and Government of the European Union from the President of the European Commission (EC)?
A) Natural gas prices
Introduction of a transitional price cap on the Dutch TTF market. The cap will be in effect pending the introduction of a complementary price benchmark to the TTF. The letter does not provide further details on the new benchmark .
Likely, as anticipated by last week's EC non-paper (and based on DG FISMA guidelines), an index equal to the average of the daily quotes of several alternative benchmarks (eg JKM and Henry Hub) will be created.
The creation of the complementary index should be followed by the promotion of a new futures market anchored to the new index.
B) Containment of gas consumption
In conjunction with a cap on the prices of the FTT, the EC will work on coordinated measures at European level to reduce gas consumption and on binding solidarity agreements between member states in this regard.
The ceiling could in fact undermine the efficiency of price signals and lead to higher gas consumption by virtue of the lower prices induced by the ceiling itself. With consequent effects on the supply needs and the need to review the adopted ceiling.
C) Electricity prices
The EC will evaluate the adoption of a European ceiling on the price of gas used for electricity generation. The cap will be accompanied by binding measures to save energy and safeguard cross-border trade in electricity.
The measure follows the so-called Spanish tope . Here an explanation written with Carlo Stagnaro.
D) Common purchases of gas
The EC will continue to build long-term partnerships with friendly countries such as Norway and the United States. In addition, it will launch the European platform for joint gas purchases to avoid competition between member states in procurement
E) Structural reform of the electricity market
By the end of the year, the EC will present its ideas to the Council and the European Parliament for a structural reform of the electricity market. More details are not provided in the letter.
F) Other
In addition to these guidelines, the EC is working on measures aimed at solving any liquidity problems in the derivatives markets to support the solidity of the energy markets.
Some open questions
- Will the cap on infra-marginal electricity generation technologies continue to coexist with the European tope ?
- If a natural gas price cap is adopted, is it still necessary to intervene on electricity prices?
- How long will the TTF price cap be in effect and from when?
- And will it vary between a "normal" and a "rationing" scenario?
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/energia/proposte-commissione-europea-elettricita-gas/ on Thu, 06 Oct 2022 06:30:41 +0000.