EU energy ministers agree emergency measures to costs for consumers

EU energy ministers agree emergency measures to costs for consumers

A reduction target of 10% of gross electricity consumption, and a mandatory reduction of 5% during peak hours will be implemented.

EU energy ministers have agreed initial emergency measures aimed at reducing electricity costs for consumers, although they fell short of an agreement on a price cap for wholesale gas coming into the EU.

The plans include a reduction in energy consumption during peak hours in order to reduce the price of gas, and redirecting excess revenues from non-gas energy providers towards struggling citizens and small and medium enterprises (SMEs).

“The agreement reached today will bring relief to European citizens and companies.

“Member states will flatten the curve of electricity demand during peak hours, which will have a direct positive effect on prices. 

“Member states will redistribute surplus profits from the energy sector to those who are struggling to pay their bills," said Ozef Sikela, the industry and trade minister from the Czech Republic, which currently holds the EU’s rotating council presidency.

A cap on revenue set at €180 per megawatt per hour on cheaper, non-gas electricity such as renewables is in the plan.

Crucially for Ireland, the levy applied relates to where the revenue is made, and not where the provider is based.

“If they're making the profit in Ireland, it's Ireland that can levy the money; if you look at it conversely you couldn't have one company based in a member state and that member state getting all of the excess revenue as part of this plan,” said an Irish source.

Initial calculations from the European Commission estimated the levy could bring €140bn, but most experts say it's impossible to tell at this point.

“We need to be careful about speculating on how much it will bring but we now have a mechanism to allow it to happen,” said the source.

Also included is a “solidarity contribution” on 33% of excess profit made by oil and gas companies.

A reduction target of 10% of gross electricity consumption and a mandatory reduction of 5% during peak hours will be implemented.

Minister for Energy Eamon Ryan said the plans were a start to dealing with at least two difficult and uncertain winters ahead. He said:

“We can't cushion the entire blow, there will still be a higher cost, even if these windfall gains are recycled, that still leaves a very high price.

“This is a two-year challenge; it's not one winter we have to prepare for; it's next winter as well, and that should influence the approach we take so that we have reserves,” he said.

 'Europe in particular is paying a very high price,' Energy Minister Eamon Ryan said. Picture: Leah Farrell/RollingNews.ie
'Europe in particular is paying a very high price,' Energy Minister Eamon Ryan said. Picture: Leah Farrell/RollingNews.ie

Earlier this week, at least 15 member states including France, Belgium, and Spain called for a price cap on all gas coming into Europe, but this was rejected by the European Commission.

Germany, Austria, and the Netherlands also rejected the idea as being too risky given concerns around global supply.

There are also concerns that this would hamper attempts to reduce demand.

A significant consideration among all countries is the fact that the EU needs to tread carefully, as Europe braces itself for at least two years of energy crisis.

Winter storage for 2022 is close to 86% on average in Europe as a result of a concerted push by member states to refill storage units in the last few months.

However, this was made possible by availability of Russian gas which is no longer an option. For next winter the EU will have to rely on other suppliers in a highly competitive market.

“Putting a fixed price cap on gas can only be applied if you say what happens if not enough gas comes to Europe.

“Because that's my counter-question. And the only answer I always hear is that the shortage will then be shared across Europe.

“But I don't think that's politically sustainable. That would bring Europe to its limits, probably to its end,” The German minister for economy and climate action Robert Habeck said.

Ireland did not sign up to the calls by the 15 countries but did not concretely oppose the plan.

“Europe in particular is paying a very high price, often in recent months because we had to fill up our storage," acknowledged Mr Ryan.

The European Commission, as well as Ireland favour a negotiated approach with reliable gas providers to reduce the price.

“We have to work internally among member states, and internationally with supply countries like Norway, America, as well as consuming countries like Japan and Korea," said Mr Ryan.

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