(Brussels) European energy ministers failed on Tuesday to agree on a cap on gas prices and gave themselves a week to hammer out an agreement and thus allow the adoption of other emergency measures to cushion the energy crisis.
“I was hoping to uncork the champagne today. The bottles will stay in the fridge […] But I think we are almost there, ”assured Czech Industry Minister Jozef Sikela, whose country holds the rotating presidency of the European Union (EU), after the meeting.
The discussions were postponed to a new ministerial meeting on December 19. In the meantime, heads of state and government could take up the subject at their summit on Thursday.
The 27 member countries of the EU have been torn for three weeks over a proposal from the European Commission aimed at temporarily capping the prices of certain futures contracts on the TTF benchmark gas market in order to prevent any further surge in prices.
This persistent division paralyzes two other approved texts, but whose formal adoption is suspended on a decision on the capping of gas prices.
The first provides for group purchases of gas, in which consortia of companies would participate, in order to obtain better prices together, and a solidarity mechanism automatically ensuring the energy supply of countries threatened with shortages.
The second simplifies the authorization procedures for renewable energy infrastructures.
“These solutions are not perfect, but they are ready and they would make it possible to lower prices”, recalled Austrian Minister Leonore Gewessler.
“The objective remains to adopt these three texts together, a single package, next Monday,” said Jozef Sikela.
Guardrails
The Commission had initially proposed to cap the prices of monthly contracts on the TTF once they exceed 275 euros/MWh for two consecutive weeks, provided that they are at least 58 euros higher than an “average world price of reference” of liquefied natural gas (LNG).
Draconian conditions never met, even during the surge in prices last August, making any triggering extremely unlikely: some of the States (France, Spain, Poland, Greece, etc.) had castigated a “bad joke” and demanded to strongly relax the required conditions.
On the contrary, reluctant to intervene, several States (Germany, the Netherlands, Austria, etc.) are demanding drastic “safeguards” to prevent a cap from threatening Europe’s gas supplies.
Some key suppliers like Norway are alarmed by a cap decided unilaterally, which could also encourage some LNG suppliers to abandon Europe in favor of Asian customers paying more attractive prices.
The Czech presidency tried to “give pledges to both sides”.
According to Jozef Sikela, an “agreement in principle” was reached on Tuesday to extend the cap to markets other than the TTF, but it will exclude contracts made over the counter (“OTC”) outside any regulated market.
Other points of agreement: an evaluation of the device will be carried out “at the end of February”, and the possibilities of automatic deactivation in the event of unforeseen disturbances “will be reinforced”.
Balance
“We have made great progress: 90% of the text is “stabilized”, with a limited number of points to be concluded on December 19, in particular the question of the price at which the mechanism would be triggered”, confirms the French Minister for Energy Transition Agnès Pannier-Runacher.
A crucial point: several countries – Greece, Italy, Belgium – had proposed lowering the threshold to 160 euros/MWh, a red line for others. Prague tried to set the bar at 220 euros/MWh.
“The matter is extremely delicate: it is wise to take a step back, to check if we are not making mistakes,” insisted German Economy Minister Robert Habeck.
The European Central Bank itself believes that an ill-conceived cap could exacerbate volatility and jeopardize “financial stability in the eurozone”.
“We have three objectives, none of which takes precedence over the other: to protect our industrialists in the event of irrational gas prices, to preserve the stability of the financial markets, and to guarantee the security of gas supply in view of the winter. 2023-2024”, abounds Mme Pannier-Runacher.
Time is running out: while with the winter, citizens and businesses are suffering from the explosion in prices, “we must take our responsibilities and act without delay”, judged the Greek Minister Konstantinos Skrekas.