EU energy ministers struggled Tuesday to overcome divisions on how to regulate the cost of energy generation in the bloc, with holes poked in the idea of capping gas prices.
The issue is a pressing one for the European Union as it grapples with sky-high inflation fed by soaring energy prices severely aggravated by Russia’s war in Ukraine.
The imminent northern hemisphere winter coupled with increasing protests over the cost of living in several EU countries has focused minds.
EU leaders agreed last week on a broad roadmap to bring down energy prices, leaving it to the European Commission and ministers to work out detailed proposals acceptable to all.
But the diverse range of energy sources in the 27 countries – including coal, gas, wind, hydro and nuclear – makes a one-size-fits-all policy difficult.
A crucial problem is the persistently high price for natural gas – which the EU, especially Germany, used to largely get from Russia, although that source has been greatly reduced since the war started.
Under current EU power market rules, energy generation is tied to the price of the most expensive source, which means gas.
Some 15 members – more than half the bloc – back an EU-wide model based on one already in place in Spain and Portugal, which sees gas-fired electricity power generation subsidized.
But the European Commission, in a document to the energy ministers, pointed out the unequal consequences such a policy would bring if applied more generally.
One side-effect could see non-EU countries linked to the EU’s power network – such as Britain, Switzerland and Balkan nations – benefiting from the subsidized gas, increasing consumption when it needs to be reduced.
Another was that Germany, the Netherlands, Italy and other countries reliant on gas-fired plants would end up paying a higher cost to cover the subsidies, while ones that mainly use other sources – particularly nuclear-powered France – would benefit financially.
The European Commission urged a “more structural method” that calls for longer-term “contracts of difference.”
They would effectively separate gas-derived electricity from that generated from renewables or nuclear plants and put different prices on each.
“If there is another mechanism, I would welcome it with open arms,” France’s energy minister, Agnes Pannier-Runacher, said as she arrived for Tuesday’s meeting in Luxembourg.
“But what is certain is that it (the model used by Spain and Portugal) exists in Europe, it works, and it shows that it is effective. It is important to look at it thoroughly,” she said.
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