In the beginning of this month, Russia mentioned it might not reopen its primary Nord Stream 1 pipeline to provide Europe – the most recent in a string of provide cuts, which Moscow blames on Western sanctions imposed over its invasion of Ukraine.
The European Commission is because of set out the EU proposals on Wednesday and governments can then thrash out the main points, presumably approving them at a Sept. 30 assembly of power ministers.
Here’s what’s in a draft of the European Fee’s upcoming proposals, seen by Reuters.
WINDFALL LEVY ON NON-GAS POWER PLANTS
The draft EU proposal would claw again income from electrical energy turbines that don’t run on gasoline and require governments to spend the money on cushioning shoppers and business from hovering power payments.
Within the EU system, gasoline crops usually set the worth of electrical energy. Non-gas fuelled energy crops promote their electrical energy on the ensuing excessive costs – though they don’t have to pay enormous payments for gasoline.
Brussels desires to skim off any extra income that wind, photo voltaic, nuclear and biomass crops make beneath this method, in line with the draft, which may change earlier than it’s printed.
The measure would apply a value restrict per megawatt hour on the income these turbines get for his or her energy available in the market. The income cap could be utilized after energy transactions are settled, so it might circuitously have an effect on costs in Europe’s exchange-traded electrical energy market, the draft mentioned. It could exclude revenues comprised of authorities subsidy schemes.
Coal crops wouldn’t be coated as a result of their gas prices have additionally elevated sharply this yr, the draft mentioned.
A draft of the proposal, seen by Reuters on Tuesday, included a 180 euro/MWh income restrict – decrease than the 200eur/MWh included in a earlier draft.
That may cap turbines’ revenues at lower than half of present market costs. Germany’s front-year electrical energy value hit a report excessive of greater than 1000 euros/MWh final month and is at the moment buying and selling at round 460 euros/MWh.
Business teams say most of Europe’s wind farms will not be reaping windfall earnings from excessive power costs as a result of they promote their energy beneath fixed-price contracts, lots of them authorities assist schemes – elevating questions on how a lot cash the EU measure would elevate.
PROFIT SHARING FOR FOSSIL FUEL FIRMS
Firms which have made bumper earnings from promoting fossil fuels at report costs could be required to make a monetary contribution to assist residents and industries grappling with sky-high payments, beneath the EU’s draft plans.
EU nations would introduce a short lived windfall revenue levy for oil, gasoline, coal and refining firms established within the EU. It could apply to 33% of those corporations’ “taxable surplus earnings made within the fiscal yr 2022”, in line with the draft.
Nations together with Italy have already launched a windfall revenue tax on power corporations. The draft mentioned Brussels would put in place a minimal charge for all EU nations, however governments may select to go greater.
ELECTRICITY DEMAND CUT
The draft EU proposal would impose a compulsory goal for nations to chop electrical energy consumption this winter, to make sure Europe has sufficient gas to final the colder months.
EU gasoline storage is now 84% full, exceeding the EU’s pre-winter filling goal. However analysts say Europe will nonetheless must slash gasoline use over winter, to keep away from storage services operating dry. EU nations have already agreed to curb their gasoline demand this winter – and electrical energy use could possibly be subsequent.
EU nations could be required to curb their energy use by 5% throughout the 10% of hours with the very best electrical energy demand every month, the draft mentioned – a transfer it mentioned may curb gasoline use within the energy sector by round 4% over a four-month interval.
EMERGENCY LIQUIDITY FOR POWER FIRMS
EU nations have additionally tasked Brussels with designing “emergency liquidity devices” to assist power firms dealing with hovering collateral wants.
Utilities promote some energy prematurely to safe a sure value however should put up a money deposit with exchanges in case they default earlier than the ability is produced. Hovering energy costs have meant corporations should put up larger margin deposits, leaving some struggling to seek out the additional money.
EU officers mentioned plans for emergency liquidity assist have been nonetheless being drafted, and would probably be printed later than Wednesday. A be aware printed by the Fee final week talked about some choices that EU policymakers are exploring.
“This may contain accepting a wider vary of property as collateral for margining goal, facilitating collateral transformation, financial institution ensures and, as a liquidity supplier, contain state assure schemes to assist such liquidity mechanisms,” the Fee be aware mentioned.
NO GAS PRICE CAP
The draft EU proposal didn’t embody a gasoline value cap – an concept that has divided the bloc’s member states.
EU nations have requested Brussels to suggest a cap however disagree on whether or not this could apply to all imported gasoline, pipeline flows or wholesale gasoline buying and selling.
Germany, the Netherlands and Denmark oppose a common gasoline value cap, warning that it may go away nations struggling to draw provides in price-competitive world markets, and endanger Europe’s winter power safety.
Italy and Poland are among the many supporters that say capping gasoline costs would pull down payments for residents and industries.
The EU has additionally backed away from an earlier plan to impose a value cap on Russian gasoline. Nations together with Hungary and Austria had opposed that concept in case Moscow retaliated by reducing off the dwindling provides it nonetheless sends to the EU.