Wednesday, December 7

Germany, Netherlands Push ‘No-Regret’ Energy Cost Cut Plan


(Bloomberg) — Germany and the Netherlands will put forward a multi-pronged approach to help bring down energy costs in the European Union, keeping open the possibility of capping gas prices in electricity generation ahead of a meeting of ministers in Prague.

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(Bloomberg) — Germany and the Netherlands will put forward a multi-pronged approach to help bring down energy costs in the European Union, keeping open the possibility of capping gas prices in electricity generation ahead of a meeting of ministers in Prague.

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The two countries are set to peddle a 10-point plan that focuses on the joint purchase of gas to stop individual countries from outbidding each other on the markets, according to a document seen by Bloomberg that will form the basis of their position at talks between energy ministers Wednesday. Such a measure should be operationalized “immediately,” while member states should also make sure their filling of gas storages next year is coordinated to stop prices shooting higher.

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In what may be seen as a concession toward countries calling for the decoupling of gas from electricity, Germany and the Netherlands contend that any such measure should be “considered very carefully and also should include burden sharing.” They highlight the risk that the model — currently in place in Portugal and Spain — could increase energy demand.

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“Any measure that is solely aimed at the symptom, a high gas price, falls short of the need to effectively solve the root cause of the problem,” the document says, calling it an “action package of no-regret-measures.”

The plan sets the stage for what will be an intense day of discussions between energy ministers, with the aim of finding common ground so that the European Commission can propose a new set of measures before the bloc’s leaders arrive in Brussels for a summit next week. An informal summit last week made some initial progress, but the most challenging issue of how to cap gas prices was left unsolved.

Germany, which has been skeptical of price-cap plans since they could disrupt supplies, has argued the main aim of the discussions should be to lower costs.

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In the latest proposal, Germany and the Netherlands say that a price cap on Russian gas imports could be considered, if it is acceptable to countries that would be most affected, and that any such measures would have to avoid energy rationing. A group of 15 member states earlier this month advocated putting a ceiling on wholesale electricity prices, with a smaller number saying that a price corridor around any cap could be used to provide some flexibility. Still, such options are complicated and expected to take more time to develop.

European Commission President Ursula von der Leyen has said that any price-cap plan needs to include measures that would reduce energy demand.

Other measures in the plan to be unveiled by Germany and Netherlands include raising mandatory gas demand reduction targets, as well as coming up with a voluntary liquefied natural gas benchmark that would run alongside the region’s key Dutch Title Transfer facility.

The EU’s executive arm should conduct an impact assessment on any of the measures to see how they would affect gas demand, security of supply and the energy transition, the Germany-Netherlands document said. Energy ministers will have an emergency meeting in November with the aim of signing off on the Commission’s proposals in time for the winter.

(Updates with emergency energy ministers meeting in final paragraph)

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financialpost.com