EU countries come together to mitigate Europe's energy prices

Following the exchange on preparedness measures, ministers concluded that, despite recent developments and in particular the cut of Russian gas flows via Nordstream I, Europe is prepared for this winter, according to an announcement by the European Council.

The main goals of the EU’s response to the energy crisis are to ensure affordable and competitive energy for EU consumers; increase the EU’s energy security and preparedness in the event of emergencies; and strengthen the energy resilience and autonomy of EU countries.

To this end, EU countries are working together on reducing the EU’s energy dependencies by diversifying energy sources and supplies; securing gas supplies while cutting demand for gas; and accelerating the transition to clean energy.

The 27 EU member states have jointly decided to phase out the EU’s dependency on Russian fossil fuels, in the light of Russia’s invasion of Ukraine and of the EU’s climate goals for 2050. With the Versailles Declaration adopted at the meeting in March, leaders agreed to progressively cut imports from Russia by reducing the overall reliance on fossil fuels; diversifying energy supplies and routes, including for liquefied natural gas (LNG); speeding up the development of renewables and hydrogen; improving interconnections between EU energy networks; and increasing energy efficiency.

In 2020, more than half of the total energy available in the EU came from imports, with Russia as the main supplier of fossil fuels to the EU. Reducing the EU’s dependency on Russian fuels is key to strengthening the EU’s energy resilience and autonomy, especially in the event of energy shortages, and provides an opportunity to accelerate the shift towards renewable energy sources.

In response to the leaders’ call for a plan to implement their decision on Russian imports, the Commission presented the REPowerEU plan in May 2022. Under the plan, the EU has established the voluntary EU Energy Platform, which supports coordinated common purchases of energy for all EU countries and some European partners.

New agreements on energy supply have been reached with international partners. The United States and Canada have increased deliveries of LNG to the EU; Norway is providing more gas; a memorandum of understanding for increasing gas deliveries was signed with Azerbaijan; and new deliveries are planned from Israel and Egypt.

As gas supply deliveries become less predictable – with Russia stopping delivery to several EU countries, the Council took urgent measures to secure supply of gas for the winter and cut gas demand in the EU, the Council said elaborating on the EU member nation’s agenda to secure gas supply.

In June 2022, the Council adopted a new regulation on gas storage which aims to ensure storage facilities are filled before the cold season: underground gas storage on member states’ territory must be filled to at least 80 per cent of their capacity by 1 November 2022 and to 90 per cent by the subsequent winters.

The new rules also establish solidarity arrangements between member states to help those countries that do not have storage facilities on their territory. These countries should store 15 per cent of their annual domestic gas consumption in stocks located in another member state.

By the beginning of September 2022, most EU countries had managed to store the required level of gas in their reserves, with the EU average being 82.5 per cent.

On 5 August 2022, EU countries agreed to reduce the overall gas demand in the EU by 15 per cent in the period between August 2022 and March 2023. Under the new rules, EU countries agreed to take measures – defined at national level – to cut demand in gas for a specified period.

As for accelerating the green transition, EU countries are committed to the goals of the European Green Deal to cut EU greenhouse gas emissions and achieve climate neutrality in the EU by 2050. This requires an overhaul of the EU’s energy system and the replacement of fossil fuels by cleaner forms of energy.

The green transition will lead the EU towards lower reliance on fossil fuels; reduced energy dependencies; and a cleaner environment and improved health.

Renewables are key to the energy transition. They are the cheapest and cleanest form of energy available and can be used to generate energy within the EU, helping reduce dependence on energy imports.

In June 2022, EU countries agreed a Council position (‘general approach’) on the Fit for 55 package – the EU’s plan to convert the European Green Deal goals into EU law. New rules, which are currently under negotiation with the European Parliament, will speed up the availability of alternative renewable energy sources and support energy efficiency.

At national level, EU countries are taking measures to provide relief to citizens and businesses facing higher bills for energy use, partly following the EU’s guidelines from the energy prices toolbox presented by the Commission in October 2021 and the EU state aid temporary crisis framework.

Factors that have contributed to the rise in prices since 2021 include the unprecedented increase in gas prices on the global markets (more than 170 per cent increase in 2021) and in the EU (more than 150 per cent increase between July 2021 and July 2022); extreme climate conditions, including summer heatwaves across Europe which push up energy demand for cooling and add pressure on electricity generation; increased demand for liquefied natural gas and a consequent spike in its price;  greater consumption of gas in Asia due to the economic recovery; and recent scarcity of nuclear and hydropower electricity generation, partly as linked to climate conditions.

During 2022, Russia has unilaterally decided to stop gas supply to several EU countries which has increased uncertainty of supplies and also pushed up the price of gas to a record high. Skyrocketing gas prices have caused a steep increase in electricity prices, due to the current functioning of the EU energy market.

Fibre2Fashion News Desk (KD)