PABLO R. SUANZES
Updated Wednesday, October 13, 2021 – 12:46
It does not address limiting price caps, reforming the wholesale market or decoupling the cost of gas from the bill, but advocates exploring the idea of joint reserves to reduce volatility
The Vice President for the Ecological Transition, Teresa Ribera, in Congress.
Minimum package and just what Spain has been warning for weeks that it did not want, it is not enough and it will be disappointing. The European Commission has presented this Wednesday its toolbox, a battery of ideas, suggestions, basic proposals and reminders of what can or should be done to try to fight against the rise of the electricity bill. Or, perhaps rather, to alleviate its effects, since short-term ideas go through income support to households, state aid to affected companies or surgical tax cuts.
Spain, along with France, Greece and other countries, asks, demands, much more “audacity and forcefulness” but does not find receptivity. The Government has led a campaign not very common in the EU to try to convince its partners and institutions of the need to do something unprecedented for a “unprecedented crisis”, but at the moment he does not succeed. In the Union, there are 20 countries that have taken national measures or are going to do so, but seven have done nothing to reduce the receipt or offset its effects. And even among those who have moved on, like Germany and the Nordics, there is more concern about maintaining the green transition than anything else. It also helps to indirectly benefit from cheaper coal, such as Berlin, but that is not the only reason.
Spain wanted to break the schemes. Look for options, as they exist in previous legislation, to set a maximum price for the megawatt hour, which at one time could not exceed 180 euros (when the real cost was close to 40) and now moves close to 300. He wants a mechanism that allows obtaining the price of gas, which is triggered throughout the continent, of the process to fix the energy mix, an unusual dissociation but, according to Moncloa, possible. It also seemed unimaginable to put the EU Stability and Growth Pact, which sets a 3% maximum deficit and a debt of 60%, into a coma, and yet it was done without problems or complaints due to the pandemic. And that I want to see Pedro Sanchez for a few months to slow the escalation.
Lack of consensus
But the options are more, directly addressing a reform of the wholesale market, since with the current legislation national governments have a limited margin of action and cannot intervene in the fixing, by supply and demand. “According to the current market design, gas continues to set the total price of electricity when it is deployed, since all producers receive the same price for the same product when it enters the grid. There is a general consensus that the current model setting marginal prices is the most efficient, but a more detailed analysis is warranted “, is the maximum that Brussels grants after the enormous pressure of these weeks.
The resistance is clear. There is no consensus among the 27 and there is no support in the European Commission, which continues to prioritize its green agenda. The messages from the community capital are that in the first quarter of 2022 the situation will calm down and prices will fall. Not like the previous levels, especially in a cold winter, but they will go down. They also believe that the benefits of the emission markets (ETS), of up to 26,300 million between August 2020 and 2021, give governments cash to mitigate the effects of the increases. They insist on measures, yes, focused on alleviating the letter of the most vulnerable households, socially and economically. But they do not want revolutions in a market whose composition, liberalization and reasonable homogenization has taken 25 years.
“Rising energy prices around the world are a serious concern for the EU. As we emerge from the pandemic and begin our economic recovery, it is important to protect the most vulnerable consumers and support businesses. . The Commission is helping Member States to take immediate steps to reduce the impact this winter. At the same time, we identify other medium-term measures to ensure that our energy system is more resilient and more flexible to withstand any future volatility. The current situation is exceptional and the internal energy market has served us well during the last 20 years “, has made clear the commissioner responsible for Energa, Kadri simson, “but we must be sure that we will continue to do so in the future complying with the European Green Agreement, promoting our energy independence and meeting our climate objectives,” he added this Wednesday.
The only clear element in which Spain’s proposals are reflected is that of the constitution of joint gas reserves. The Executive proposed, in a letter signed by Vice Presidents Calvio and Ribera, that the EU do with gas the same as it did with Covid vaccines: joint purchases and joint storage to curb volatility in times of tension and shock, something that Brussels welcomes, like everything that involves giving it more powers and powers. Now the EU has capacities to store 20% of the gas it uses annually, but not all countries have facilities or capacities to do so, something problematic when 90% of the supply comes from outside and is subject to geopolitics or political decisions or strategies of non-democratic governments. Thus, it is advocated to explore a path that, in any case, would be slow and would require coordination, facilities and interconnections that will not be available in the short term.
Aid to homes and businesses
The EU College of Commissioners has spoken out in favor of measures to support the most vulnerable households, aid for the most affected companies and sectors, or highly targeted tax cuts. But it also shows its support for investments in renewables and energy efficiency measures, while “evaluates the design of the electricity market”, a deliberately vague and overt commitment. Among the medium-term suggestions is “asking the European energy regulators (ACER) to study the benefits and drawbacks of the existing electricity market design and propose recommendations to the Commission”, but the deadline is daunting for the demands of the vice president Ribera: “when it is pertinent”, says the proposal presented today.
But there is nothing new in its model and there are no legislative measures, nor are they expected before the end of the year and the disappointment in Madrid is manifest and no secrets. The warnings have been repeated but not all partners see the same danger that Moncloa detects, of loss of confidence in the green transition or the possibility of systematic protests as happened with the Yellow Vests in France.
The Commission has packed a list of what can be done or what many have already done. It does not bring money, changes in the framework, creative mechanisms. Just remember that compensating checks can be written or the burden of those social bonuses can be removed through ETS market proceeds. Or prevent, as is already the case in many countries by law, power outages or heating during the winter. Likewise, tax benefits for the lowest incomes, tighten to guarantee transparency in international markets, investigate anti-competitive behavior or facilitate the financing of renewables, although European sources explain that no cases of price manipulation have been detected, as Spain suspects that they have been produced with ETS where prices have skyrocketed and where Madrid sees suspicious movements of investment funds.
“The transition to clean energy is the best insurance against price shocks in the future and must be accelerated”, reiterated Commissioner Simson, who will go to the European Parliament tomorrow and next week to explain her ideas to the energy ministers. The Heads of State and Government will also discuss it in depth at a European Council at the end of next week, a meeting that is planned and in which Pedro Sánchez wants to force a substantive debate and not just about patches. It’s the only option for a much more aggressive twist and community approach, something that seems downright complicated right now.
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