Commission considers price cap for ‘green’ electricity

Commission considers price cap for ‘green’ electricity
Commission considers price cap for ‘green’ electricity

To reduce energy bills, the European Commission is hatching a plan to decouple the electricity price from the gas price.

European Commission officials are working overtime to work on the emergency mechanism that Commission President Ursula von der Leyen announced early this week to bring down galloping energy prices for consumers.

A leaked non-paper shows that the Commission wants to pull different strings. One route is that the profit margin would be skimmed off from energy companies that generate electricity from sun, wind or nuclear power plants. Today, their price is calculated on the basis of gas as the most expensive energy source, although their production costs are much lower. As a result, they reap huge profits.

The plan is to decouple the electricity price from the gas price, introducing a price cap for electricity from wind, solar or nuclear power. National governments should use that revenue to lower citizens’ and businesses’ electricity bills.

Details on how that should be done have not yet been clarified. What those energy companies get for their electricity and where the price cap is, would be determined in consultation with the national regulators – depending on the energy mix, which differs greatly between the 27 Member States. This has the advantage that it can be implemented relatively quickly.

The leaked document dates from about ten days ago and has since been updated. But the great orientation remains.

Intervene on demand

In addition, a plan is also envisaged to reduce the demand for electricity in the EU, in line with the agreement reached by member states already in July to reduce the demand for natural gas by 15 percent by March 31, 2023.

An intervention in the gas market is also being considered. For example, the option of a price cap for Russian gas remains on the table.

There is not yet a consolidated proposal. There is great pressure on the Commission to put forward concrete proposals for the special meeting of energy ministers next Friday in Brussels. But it is equally possible that von der Leyen will only serve clear wine during her speech on the state of the EU in Strasbourg on 14 September. It also plans to make a proposal early next year to structurally reform electricity market pricing.

The article is in Dutch

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