With the adoption of the Communication on Energy Prices, the EC intends to address the issue of extreme increases in energy prices

The European Commission (EC) today adopted a communication on energy prices, addressing the extraordinary rise in global energy prices, which is expected to continue throughout the winter, and helping European people and businesses in the Press Office of the LETA EC Representation in Latvia.

The Communication sets out a set of measures that the European Union (EU) and its Member States can use to address the immediate effects of real price increases and further strengthen resilience to new price shocks. Short-term government measures include emergency income support for households, state support for enterprises and targeted tax cuts. The EC will also support investment in renewable energy and energy efficiency, consider measures for the storage and purchase of gas stocks, and assess the current market structure.

The EC noted that the current rise in prices calls for a rapid and coordinated response. The current legal framework allows the EU and Member States to take action to prevent immediate effects on consumers and businesses.

Priority should be given to targeted measures that can rapidly mitigate the effects of price increases on vulnerable consumers and small businesses. These measures should be easily adjustable in the spring, when the situation is expected to stabilize.

Immediate consumer and business protection measures include providing exceptional income support to energy-poor consumers, for example through vouchers or partial bill payments, which can be supported by EU Emissions Trading Scheme (ETS) revenues.

The measures also include allowing bills to be suspended, introducing safeguards to avoid disconnection, providing targeted temporary reductions in tax rates for vulnerable households, and providing support to companies or sectors in line with EU state aid rules.

It also aims to promote international energy information activities to ensure transparency, liquidity and flexibility in international markets, to investigate anti-competitive behavior in the energy market and to ask the European Securities and Markets Authority (ESMA) to further improve its monitoring of carbon market developments.

The measures also aim to facilitate wider access to renewable energy contracts and to promote them through support measures.

The EC noted that the transition to clean energy is the best guarantee against future price shocks and needs to be accelerated. The EU will continue to develop an efficient energy system with a high share of renewable energy. Although cheaper renewables are playing an increasingly important role in grid supply and pricing, other energy sources, including gas, are still needed in a context of higher demand.

According to the EC, in the current market model, gas still determines the total price of electricity if it is used, as all producers have the same price for the same product that enters the grid – electricity. There is a broad consensus that the current marginal pricing model is still the most efficient, but further analysis is needed. The crisis has also highlighted the importance of storage for the functioning of the EU gas market. EU storage capacity currently accounts for around 20% of annual gas consumption, but not all Member States have storage facilities and their use and maintenance obligations vary.

Medium-term measures for a decarbonised and sustainable energy system include expanding investment in renewables, repairs and energy efficiency and speeding up renewable energy auctioning and permitting processes, as well as developing energy storage capacity to support the share of renewables, including batteries and hydrogen.

The measures include inviting the European Regulators (ACER) to study the advantages and disadvantages of the current electricity market model and, where appropriate, to make recommendations to the EC, considering a revision of the Security of Supply Regulation to ensure better use and operation of gas storage in Europe.

It is also planned to explore the potential benefits of voluntary joint purchasing of gas stocks by Member States, to set up new regional cross-border gas risk groups to analyze risks and advise Member States on preventive and contingency plans, to increase consumer participation in the energy market. , generate their own electricity and join energy communities.

The EC explained that the measures set out in the package would help to respond in a timely manner to the current sharp rise in energy prices as a result of the global emergency. They will also contribute to Europe’s fair and sustainable transformation of energy at affordable prices and greater energy independence. Investments in renewable energy and energy efficiency will not only reduce dependence on imported fossil fuels, but also provide more affordable wholesale energy prices that are more resilient to global supply constraints. The transition to clean energy is the best guarantee against future price shocks and needs to be accelerated, also for climate reasons.

The EC noted that, as in many regions of the world, energy prices are currently rising sharply in the EU. This is mainly due to growing global demand for energy, especially gas, as the economic recovery from the peak of the Covid-19 pandemic is gaining momentum. Europe’s carbon price has also risen sharply in 2021, but at a slower pace than gas prices. The impact of rising gas prices on electricity prices is nine times greater than the impact of rising carbon prices.

The EC has consulted widely on how to respond appropriately to the current situation and has participated in discussions on this issue with Members of the European Parliament (MEPs) and EU Council Ministers, while also addressing industry and global energy suppliers. Several Member States have already announced their measures to reduce price increases, while others want the EC to provide guidance on what measures they can take. Some partners in other parts of the world have already indicated that they plan to increase their energy supply to Europe.

The package presented on Wednesday allows for a coordinated response to protect those most at risk. It is carefully designed to address the short-term need to reduce energy costs for households and businesses without compromising the EU’s internal energy market or the green transition in the medium term.

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