Business

The EU is divided over gas price caps

On the eve of an vital Council of European Energy Ministers, the ambiance between member states and the Brussels govt is electrifying. The level that the Spanish authorities accused the European Commission on Wednesday Paying the world’s head », following his proposal to manage gas costs, which stay unusually excessive available in the market. At the tip of the day, France additionally added a layer, denouncing a textual content ” insufficient “, and ” political demonstration “who” The impact will seemingly be zero

In reality, the fee launched a long-awaited formal word on Tuesday night, which is supposed to permit gas costs to be fastened after a month in the past. At the request of assorted nations, the corporate is extra particularly attacking the Title Transfer Facility (TTF), the Dutch digital hub the place shippers and clients negotiate gas provides on the Old Continent.

It could be a type of hall, however used solely in distinctive instances, above a sure threshold. This would imply saying: We chorus from shopping for gas past this ceiling “, defined, a couple of weeks in the past, the economist Jacques Persebois.

But here is the factor: the circumstances that Brussels imposes on this capping of the TTF are so strict that the mechanism might by no means apply. If it existed on the peak of the disaster, it couldn’t even be triggered, as there are too many safeguards.

Two very restrictive circumstances

For good purpose, this market construction will solely be activated Only if the TTF price exceeds 275 euros per megawatt hour (MWh) for 2 consecutive weeks.Even when Putin threatened to cease gas exports to Europe, on the pretext that one of many generators was now not working, these circumstances weren’t met! », emphasised Phuc-Vinh Nguyen, researcher on the Center for Energy on the Jacques Delors Institute. Indeed, when costs briefly reached a file excessive of 342 euros per MWh final August, they didn’t keep above 275 euros per MWh for 2 consecutive weeks.

And that is not all: for sealing to be efficient, it is going to even be essential on the similar time, that The TTF price is 58 euros per MWh greater than the world reference price for liquefied pure gas (LNG).. and this, For 10 consecutive buying and selling days.

However, new LNG regasification infrastructure will quickly open in Europe, and particularly in Germany, to obtain the well-known gas transported by boat from the 4 corners of the world.

Critics are the fuse

So that is a number of entry factors will decongest the continent’s northern gas plate and due to this fact mechanically slender the hole between TTF costs and international LNG costs “, we are saying within the workplace of the Energy Transition Minister, Agnes Panier Runacher. ” This would make the appliance of this course of most unlikely from an goal perspective. […] It’s a security internet, however very low, and it takes a superb free fall earlier than it enters “, emphasised an adviser.

“This is insane, and even complicated. We can query the will to see this ceiling applied at some point. It appears that the European Commission has provide you with one thing to provide you with as an alternative of placing ahead a very efficient and related course of. Phuc-Vinh Nguyen provides.

For her half, Spain’s Minister of Environmental Change, Teresa Ribera, even known as the proposal on Wednesday ” joke “, to whom he” Will strongly oppose “Worse, in response to Madrid, it” All would result in larger will increase in costs, jeopardizing the regulation coverage Inflation

“Europe now not desires to be hostage to a provider that makes use of gas as a weapon”, Christophe Lecourtier (Business France)

“A Process of Last Resort”

In any case, the European Commission stays very ambivalent concerning the thought of ​​intervention within the gas market. Last month, its president, Ursula von der Leyen, additionally hinted that the TTF ought to have a ceiling ” Flexible sufficient to make sure safety of provide, and excessive sufficient to function in markets “, confused many observers. Because Brussels fears provider poaching, the LNG market is extremely aggressive globally.

If the ceiling is too strict, there is a powerful danger that they are going to ship their cargo elsewhere, for instance, to Asia at a greater price. “, underlined a couple of weeks in the past “gallery” Javier Pinon, founding father of vitality dealer Selectra.

This might finally exacerbate Europe’s gas provide disaster.

It is not regulatory intervention to set market costs at an artificially low stage. […] It is a mechanism of final resort to forestall and, if essential, tackle episodes of excessively excessive costs that aren’t according to international price developments. “, Kadri Simson, European Energy Commissioner, clarified on Tuesday through the presentation of the brand new legislation on Tuesday afternoon.

Why Brussels’ plans to decontrol the gas market might backfire in Europe

“There is a restrict to unreasonable costs.”

However, the TTF not solely displays the promoting price of LNG in Europe, however can even decide the provision of gas by way of pipelines, which might not often be redirected to a different buyer. And particularly these from Norway to Europe, related by a gas pipeline. ” In this regard, TTF capping could make it attainable to say that there is a restrict to unreasonable costs mentioned Phuc-Vinh Nguyen.

Extreme price volatility Enabled Norway, which grew to become the EU’s major provider [33% des importations, Ndlr]With file income over the previous yr Gas revenues are anticipated to succeed in 200 billion euros in 2022, up from 65 billion final yr. And for good purpose, for the reason that TTF serves as an indicator for long-term contracts, when the price of the TTF rises, so does the acquisition price of Norwegian gas. “, he famous.

Upcoming discussions

One factor is sure: the Brussels proposal is unlikely to be accepted on the assembly of European vitality ministers tomorrow. ” It is attainable that the Commission calculated from the outset that a number of states would negotiate downwards Phuc-Vinh Nguyen notes.

It stays to be seen which choices will emerge through the negotiations, whereas some nations, comparable to France and Spain, wish to go a lot additional, whereas others, comparable to Germany or the Netherlands, present little inclination to border the gas market.

Regardless of the end result of the negotiations, the scenario within the LNG market must be tense in any case because of international competitors to acquire the valuable gas.

Energy Sovereignty: Storenji, NG’s subsidiary to inflate French gas shares