The Twenty-seven seek this Monday the final agreement to the gas cap

By: MRT Desk

Published on:

The Twenty-seven seek this Monday the final agreement to the gas cap

The Energy Ministers of the Twenty-seven have the mandate to close this Monday an agreement on how to establish a price cap on gas imports in the EU, a complex negotiation that has “kidnapped” two other important regulations to respond to the energy crisis.

The Heads of State and Government of the EU countries expressed in the conclusions of last Thursday’s summit, adopted unanimously, that “the European Council welcomes the progress made and calls on the Council to complete its work on 19 December 2022”.

That document includes a specific date, that of this Monday, a modification with respect to previous drafts consulted by EFE in which that urgency was also underlined, but without so much specificity.

The two blocs of countries, the majority that want a cap on gas in which Italy, Spain, Greece or Belgium are located, and those that are reluctant to intervene in the market, such as Germany, the Netherlands or Hungary, have approached positions in recent months. But it remains to be decided, among other things, the price of that cap.

“The price is going to be the focus of the discussion. It’s about knowing what an excessive price is,” says a diplomatic source.

After months of debate, the Commission made a first legal proposal at the end of November to set that cap at 275 euros per megawatt-hour (MWh) in the WTF futures index of Amsterdam, which last August touched 350 euros.

The cap also required a difference of 58 euros with respect to the average of other international liquefied natural gas (LNG) markets, as well as certain activation and deactivation conditions.

Already in the hands of the countries, this draft has been negotiated and is now working with a proposal of cap at 200 a gap of more than 35 euros to the average price in the liquefied natural gas market for three days, and a “dynamic corridor” that would evolve that ceiling depending on the difference with other international markets.

An agreement has also been reached on the possibility of affecting other European indices of less relevance and that it applies only to organized markets, leaving out private operations (OTC).

There has also been consensus on the deactivation clauses and that there is a safeguard to cancel it if an emergency situation occurs, such as a Member State being left without supplies because it does not attract buyers. But not the exact activation conditions or the price.

The agreement to the so-called “market correction mechanism”, which is intended to be enabled at the beginning of January, depends on two other regulations that are already politically agreed, but that the supporters of the gas cap refuse to formally adopt until the issue of limiting the price of gas purchases is resolved.

The first is a regulation processed urgently to establish solidarity clauses between countries in case of gas shortage and the conditions for the joint gas purchase platform to start operating, which seeks to add demand among the Twenty-seven and thus achieve lower prices.

The second is an emergency regulation to relax the conditions for approving new renewable energy infrastructure, seeking to give the EU autonomy in the field of energy, an area that has been compromised since Russia’s invasion of Ukraine.

The three files seek to prepare the EU for a 2023 that is shaping up to be particularly difficult in terms of gas supplies, with hardly any shipments from Russia to the community club and an international LNG market with a limited supply, which will be even more compromised if the Chinese economy wakes up.

“I don’t think we’ve been through the hardest. I think we have to prepare seriously next winter, “said last Thursday at the end of the European summit the president of France, Emmanuel Macron, whose opinion is shared by the European Commission and the International Energy Agency.

Leave a Comment