EU energy regulator casts doubt on bloc’s ‘untested’ new gas price cap

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The EU’s energy regulator has warned that the bloc’s new gas price cap was unlikely to decrease prices for customers or companies if nations stored on speeding to fill their depleted reserves, calling the mechanism agreed by ministers this week “unprecedented, untested”.

Christian Zinglersen, director of the EU’s joint energy company Acer, stated he can be “reluctant to rely on this gas price cap” alone to stop the sorts of price spikes that roiled Europe’s energy markets in the summertime following Russia’s invasion of Ukraine.

The emergency cap, which set a restrict of €180/MWh (per megawatt hour) on the price of gas traded within the bloc, was sealed on Monday as Brussels stepped up its effort to stop a repeat of the price surges that resulted from member states’ speeding to supply various provides forward of winter. EU policymakers concern that additional price will increase might immediate social unrest and destroy industrial output.

The mechanism will probably be triggered when costs attain €180 and sit at €35/MWh or extra above international LNG costs. Prices on the EU’s benchmark Dutch Title Transfer Facility had been about €107/MWh on Tuesday, equal to roughly $180 per barrel in oil phrases. At the peak of the cost to refill gas storage in August, costs hit a document excessive of greater than €300/MWh.

EU energy commissioner Kadri Simson stated, after energy ministers accredited the cap, that “with such a mechanism in place, Europe will be better prepared for the next winter season”.

However, Zinglersen stated that discussions over the price cap — which got here after months of strain from largely southern European states — had used up political bandwidth in Brussels which could have higher centered on different measures to quell the energy disaster.

“Obviously negotiating back and forth with the gas price cap . . . does risk crowding out these other things, which hopefully are slightly less controversial but still super important,” he stated, including it was “a difficult creature. It’s unprecedented, it’s untested.”

It can be higher to focus on implementing measures that fell “below the political radar”, the regulator stated.

One instance can be to raised regulate the filling of gas containers in order that it occurred step by step, to stop spikes in demand in an already tight international market. Others embody maintaining focus on demand discount and enhancing the circulation of electrical energy between member states as even internet exporting nations can usually require sizeable imports of energy as demand fluctuates.

“Keeping these energy flows going whether it’s gas or electricity is really a make or break moment for the EU over the winter and beyond,” Zinglersen added.

Since Russia minimize provides to the EU, demand for shipped LNG has vastly elevated and affected costs. The potential for China to additional ease its Covid lockdowns has prompted fears of a tougher LNG market subsequent yr.

To leverage the bargaining energy of the EU, Brussels has created a joint buying platform for gas, in one other piece of laws signed off by ministers on Monday.

Maroš Šefčovič, European Commission vice-president, who held a gathering with 32 energy corporations on Tuesday, stated the fee’s “immediate priority is to take all necessary steps towards demand aggregation and joint tendering well before gas-storage filling season begins next year”.

Zinglersen stated the EU had necessary classes to study from its efforts to quell the energy disaster, and will focus on infrastructure to ease congestion.

Transmission system operators who handle pipelines have benefited from a 70-fold rise in congestion fees — charges paid to grid operators when demand is larger than provide for the interconnector — as a result of change of provides coming into the bloc, he famous.

“In the past, you had infrastructure which was predicated upon huge pipeline volumes coming from east to west . . . from Russia towards greater parts of Europe, and now that is much less. And, who knows, maybe next year it will be almost non-existent,” he warned.

The International Energy Agency has stated that, with out Russian gas provides, the EU might face a shortfall of 30bn cubic metres subsequent yr, nearly the annual consumption of the Netherlands.

The article has been amended since first publication to incorporate extra feedback from Christian Zinglersen



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