European proposal to decouple electricity prices from gas prices. – Insolence

European proposal to decouple electricity prices from gas prices.  - Insolence

Here are the options considered by the European Commission and sent by official mail to the different states.

What is written and proposed is very important for the future of European energy policy, as well as for the future of inflation. In fact, these measures, although non-monetary, would probably reduce inflation considerably in the euro zone.

I’ll spare you the introductory babble on the causes of the current energy mess.

We in the big Commission are beginning to realize that the European citizen will not be able to pay EUR 10 or 15,000 a year in heating bills without this leading to a riot that will make the movement of the vests look like cat pee. Not everyone is a yellow vest. Everyone gets hot and needs energy.

Options considered

A) Delink/limit the impact of the price of gas on the price of electricity

– Temporarily limit the price of gas used for electricity production;

– Temporarily limit the price of gas imported from certain jurisdictions;

– Temporarily exclude the production of electricity from gas from the order of merit and from setting prices in the electricity market.

B) Increase market liquidity

– Immediate support through credit lines for market participants facing very high margin calls, including the case of a specific solution at European level, for example through the role of the ECB;

– Change the trading rules in energy exchanges, for example by temporarily modifying the regulatory requirements for guarantees in electricity trading. regulatory requirements for guarantees in electricity trading, including review of automatic price cap adjustments. Automatic maximum price adjustments;

– Temporarily suspend electricity derivatives markets in Europe; or subject futures trading to specific ranges.

C) Coordinated measures to reduce electricity demand

– Demand reduction measures in the electricity sector, for example similar to the coordinated demand reduction measures in the gas sector adopted in July 2022. demand reduction measures in the gas sector, such as those adopted in July 2022.

D) Limitation of income of inframarginal electricity producers

– Temporarily cap the price of electricity earned by inframarginal producers.

E) Impact of the EU Emissions Trading Scheme

– Assess the possibilities of using the EU Emissions Trading Scheme to deal with current high electricity prices and ensure that the Council takes the necessary measures quickly. Ensure that the Council moves quickly towards an agreement on the recovery chapters of REPowerEU (Recovery and Resilience Plans (RRF), including the possibility of using the quotas of the Market Stability Fund.

– the security of electricity and gas supply at European level must be preserved;

– the internal energy market and the benefits derived from it must be preserved;

– the measures must not lead to an increase in gas consumption, nor jeopardize efforts to reduce gas consumption in Europe

– the measures must be simple to implement and coordinated at EU level;

– the measures should mitigate the impact on consumers’ energy bills;

– consistency with the objectives and implementation of the European Green Contract. The above emergency action options are designed as an immediate response to the current extraordinary situation. However, we should continue to discuss a systemic improvement of the design of the internal energy market, to make it easier to manage and better prepared for similar market conditions in the future.

Such an update must be properly studied, based on an in-depth analysis and impact assessment, and take into account the gradual implementation of a future decarbonised energy market.

Problems: 1. Do you agree that the Commission needs to propose measures at EU level to be adopted in time for the next heating season? If so, which of the described options or alternative options should be pursued?

2. What type of specific instruments would you consider appropriate to achieve a rapid resolution of the aforementioned problems?

Carlos Sannat

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