Filenews 14 September 2022
The Commission's plan to tackle the energy crisis was announced on Wednesday morning by its President, Ursula von der Leyen, at the annual "State of the European Union" address.
Ursula von der Leyen, who chose to wear a jacket and blouse in Ukraine's colours, referred at the beginning of her speech to Russia's invasion by pledging that the EU would continue to support Kiev and then outlined the plan to tackle the energy crisis by proposing a reduction in energy consumption during peak hours to reduce total electricity consumption in the EU and a cap on the super profits of production companies energy at low cost.
Confirming the information that has come to light in the previous hours, the President of the Commission announced that measures will be proposed to member states to reduce electricity consumption but also to support businesses.
It also announced a cap on the profits of companies that produce electricity with the aim of raising more than €140 billion. "Companies that produce energy at low cost have revenues that they have never had before. They never dreamed of it. The profits are good, but in our time, it is wrong to receive excellent revenues and record profits, taking advantage of the war and on the backs of our consumers. In these times, profits must be shared and channelled to those who need them most. And therefore, our proposal also includes producers of electricity from fossil fuels that need to contribute to raise more than €140 billion for Member States."
This levy will apply to electricity producers who do not use natural gas, but wind, solar, geothermal energy, waste, nuclear energy, lignite, oil and certain types of hydropower and biomass with the requirement that EU countries be able to collect this levy and redistribute the funds to consumers.
The President of the Commission also referred to the plan to create a new European bank for hydrogen "that will help to create a hydrogen market", adding that €3 billion in funds will be secured for this initiative.
As the President of the Commission underlined, these are all exceptional and temporary measures. "We are working to include our discussion on gas price caps, we need to continue to work for lower gas prices. Therefore, on the one hand, we must ensure security of supply. On the other hand, we must ensure global competitiveness, security of supply, because gas still needs to come to the European Union. On the other hand, if it is too expensive, it harms our global competitiveness. Thus, we will develop with member states a set of measures to take into account the specific nature of our relationship with suppliers, ranging from unreliable suppliers such as Russia to responsible ones such as our Norwegian friends for example.
President von der Leyen also said that today gas markets have changed dramatically from pipeline gas which previously had plenty to increasing quantities of LNG, but the reference use in the gas market has not been adjusted. "That is why the Commission will work towards establishing a more representative benchmark for electricity trading that will truly reflect this change in the market that we have seen and at the same time we also know that energy companies face serious liquidity problems in future electricity markets. We will work with regulators to ease these problems by amending the rules by taking measures to limit price volatility and we will amend the Temporary State Aid Framework in October to allow state guarantees to be provided while maintaining a level playing field. This is a very complex issue."
At the same time, she stressed that consumers should reap the benefits of low-cost renewable energy sources: "This should be the purpose. So we need to decouple the dominant influence of natural gas on the price of electricity and that is why we will make a deep and comprehensive reform of the electricity market."
European Commission President Ursula von der Leyen also expressed the European Union's clear position to maintain the sanctions it has imposed against Russia while continuing its financial support to Ukraine.
As the President of the Commission said, "our sanctions will remain, nothing will change. We will not seek any conciliation, but we will show determination." According to her, Russia's economy is in the intensive care as it has fallen by 75% in income. Aeroflot cannot fly its planes, Russian industry is in dissolution, and those who brought the Russian economy to the point of destruction are in the Kremlin.
European interventions, moreover, will largely judge the subsidy model for natural gas, which is expected to have staggered characteristics, as will be the case with electricity. The exact way of support has not been locked and it remains to be seen whether there will be a "consumption bonus", as will be done with the current.
