European Union energy ministers backed an initial package of measures to tame the gas crisis, including a power-demand reduction goal and a profit grab from energy companies.
(Bloomberg) — European Union energy ministers backed an initial package of measures to tame the gas crisis, including a power-demand reduction goal and a profit grab from energy companies.
There’s some frustration in Brussels that more hasn’t been done, however, as the challenges facing policymakers keep growing.
Overshadowing the meeting is the threat to the security of energy infrastructure after the suspected sabotage of the Nord Stream pipelines. Countries are moving to step up security, even as they admit their ability to prevent attacks is limited.
Key Developments:
- Habeck says Germany must save more gas
- TotalEnergies spots drone flying near North Sea field
- Italy sends navy to protect pipelines
- Gas flows via Ukraine stable; prices flat
- Satellites capture first images of pipeline leaks
- NATO chief will speak at 6 p.m. Brussels time
- Germany tells allied gas suppliers not to exploit situation
- Draghi warns against distorting market
Read this: How Would You Manage Europe’s Energy Crisis?
What Happened to the Caps? (12:45 p.m.)
As the EU moves forward with its first package of measures, it’s becoming increasingly clear that some of its most radical ideas are running into stark divisions within the bloc, as well as market realities.
Some key member states have all but dropped an idea of putting a price cap on gas from Russia. That was meant to cut Moscow’s revenues as well as helping European prices. The idea was also floated of a wider cap that would also cover gas from Algeria and Norway.
The problem is any such measure would endanger supply, at a time when the bloc is desperate for alternative sources of gas. And capping LNG is probably not an option in a vastly competitive global market.
Another idea is a cap on the wholesale gas price, as backed by 15 nations. That’s looking hard to execute as it would require an overhaul of the market.
That leaves the option of capping the price of gas just for power production in order to sever the link between gas and power and alleviate the burden on bills. It’s the narrowest, most modest version of a price cap, though it still comes at a big fiscal cost.
EU Ministers Back Package (11:06 a.m.)
Ministers reached an agreement on an initial energy intervention package, setting a goal to reduce power consumption and agreeing to tap windfall profits of companies and redirect them to customers and businesses.
It includes a binding target for each member state to lower its electricity use by 5% during peak hours during the heating season. It also allows governments to slap levies on fossil-fuel companies and power producers with cheaper inputs, a move the bloc estimates could raise 140 billion euros ($138 billion).
Habeck Says Allies Should Avoid ‘Exploitation’ (10 a.m.)
German Economy Minister Robert Habeck suggested that countries stepping into supply gas to the EU, which include Norway and the US, shouldn’t exploit the skyrocketing prices at Europe’s expense.
“I call on the EU to work for a different negotiation position with those states which are supplying gas,” he told reporters. “Because in this situation, we are in a partnership, and partnership cannot mean exploitation.”
Italy Sends Navy to Protect Pipelines (9:20 a.m.)
Italy is reinforcing protection of strategic trans-Mediterranean pipelines, the Navy said.
Two ships of the Italian Navy, equipped with remote-controlled submarines, are in charge of monitoring key areas in the Mediterranean Sea, specifically around the infrastructures transporting energy from Maghreb countries to Italy, according to a statement.
EU Focuses on Three Steps for Now (9:15 a.m.)
Ministers are likely to sign off on a package based around three main measures — the easiest ones on which to achieve consensus. A gas cap is not part of the package as it’s proved too controversial, at least for now. The main measures to be approved today are:
- A mandatory power demand reduction target at peak hours
- A profit-grab on power producers with cheaper input costs — for example those using nuclear, renewables
- A levy on excess profits of fossil-fuel producers. The funds would be redistributed to help struggling consumers
German Finance Chief Says Putin’s ‘Energy War’ Will Fail (9:10 a.m.)
German Finance Minister Christian Lindner said the government is protecting Europe’s biggest economy from the fallout of the energy crisis with an “all-in strategy” and warned Russian President Vladimir Putin that his “energy war” will fail.
Putin’s “goal is clear,” Lindner said in a speech to the lower house of parliament in Berlin ahead of a vote approving the government’s temporary cut in sales tax on gas purchases to 7% from 19%. “Our prosperity should be shaken, our economic structure hit so that in the end our social cohesion erodes, also with the aim of bringing the solidarity that this country has for Ukraine to an end,” Lindner added. “We’re sending out a clear signal that he will fail.”
Sweden Taking Steps to Secure Infrastructure (9:20 a.m.)
Swedish Energy Minister Khashayar Farmanbar said authorities are taking steps to secure energy infrastructure after the Nord Stream blasts, which he said were probably perpetrated by a state actor.
Norway Can’t Avert Sabotage (9 a.m.)
Norway’s security service lacks tools to prevent sabotage against the country’s energy facilities while such risks have increased, public broadcaster NRK reported, citing the agency’s Deputy Chief Hedvig Moe.
Frustration at Slow Pace (8:30 a.m.)
Some member states expressed frustration that more hasn’t been done to reach an agreement sooner to bring down gas prices.
The European Commission set out earlier this week the risks of implementing a gas price cap on its own without additional measures.
Not Safe Enough Yet to Assess Pipeline Damage (8:25 a.m.)
US Defense Secretary Lloyd Austin said he spoke with his Danish counterpart, who said it will still be several days before it’s safe enough to assess the damaged pipelines.
“There is a lot of speculation but quite frankly, until a complete investigation is done, no one will be able to determine for certain what happened,” Austin told reporters in Hawaii.
EU to Focus on Three Steps (8:20 a.m.)
Ministers will focus on three measures that were the easiest to secure consensus around: a reduction of electricity demand, a cap on profits from energy producers with cheap input costs, and a tax on excess profits from fossil fuel companies. A cap on gas prices is not on the table.
Czech Energy Minister Jozef Sikela said more needs to be done, and now.
“This is just the first part in the puzzle. We must not stop here,” Sikela said. “We are in an energy war with Russia. The winter is coming and we have to act now.”
Europe’s Biggest Reactor Reaches Full Capacity (8 a.m.)
Europe’s newest nuclear reactor now has the biggest output too, bringing some relief to the region’s strained electricity market.
Finland’s Olkiluoto-3, which sits on a peninsula by the Baltic Sea, reached full power for the first time last night, its operator Teollisuuden Voima Oyj said.
Germany Warns of Gas Shortage Threat This Winter (7:30 a.m.)
German Economy Minister Robert Habeck said the government’s move to put a lid on gas prices won’t hinder efforts to cut consumption, but he reiterated an appeal for all consumers to use less fuel to avert a shortage this winter.
“We’re still in this emergency situation and if we don’t save, if households don’t reduce usage, then the threat remains that we’ll have too little gas this winter,” Habeck said in an interview with Deutschlandfunk radio.
The EU must also come up with a “unanimous response” to help bring down prices for gas imported into Europe, he added, accusing some countries, even allies, of “making out like bandits.”
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