With the costs of vehicle fuel and power generation soaring to alarming highs, energy ministers throughout the European Union are contemplating a series of market reforms that will, essentially, put a lid on any further price increases in the near future.
Energy ministers from the 27 member states are set to discuss the possible provisions governing the move at a meeting slated for Friday, September 9, 2022.
Aside from emergency measures meant to put a cap on soaring fuel prices and to differentiate energy generation costs from gas and petroleum products, ministers are set to discuss long-term reforms, including the adjustment of electricity prices based on the use of more cost-efficient sources of renewable energy.
One of the primary reasons for the surge in the price of energy within the European continent is how the region’s gas supply has dwindled thanks to economic sanctions imposed against Russia following its invasion of Ukraine.
Several EU member states accused the Russian government of blackmail as it is apparently suppressing the supply of crude oil and natural gas in retaliation for the aforementioned sanctions.
A number of Russian power and fuel firms have not denied this; indeed, Gazprom, the country’s largest gas company, blamed the reduction of supply on the sanctions and technical issues.
A Complex Challenge
However, changing energy systems for 27 countries is a complex process that will take a considerable amount of time. As a point of comparison, experts are reminding the public that it took two decades to codify the measures that govern the cross-border trading of energy commodities among EU member states. In this case, policymakers are hard-pressed to find relevant solutions within a much shorter time frame.
Ursula von der Leyen, President of the EU, remarked that the recent hike in power prices has increased revenues for non-gas generating firms whose operational costs are significantly lower. These include facilities like wind farms, nuclear plants, and solar centers. Von der Leyen added that countries could save money by using the proposed price cap to curtail these revenues and use any savings to reduce the cost paid by the public.
In the proposed draft resolution, the price cap is set at 200 euros per megawatt hour, an amount that is less than half of wholesale power prices currently being charged in Germany. Along with wind and solar facilities and nuclear power plants, others that will be affected by the cap include biomass-burning plants and coal-fired generators.