EU leaders agreed at a summit on Friday (25 March) to pass the baton of energy market reform to the European Commission but allowed Spain and Portugal special status to deal with the ongoing energy crisis.
As EU citizens and companies buckle under the strain of record-high energy prices, the pressure was on leaders to deliver as they discussed the energy crisis, joint purchasing of gas and gas storage in Europe.
“Sustained high energy prices have an increasingly negative impact on citizens and businesses, which is further compounded by the Russian military aggression against Ukraine,” said the final summit statement.
During a day of gruelling negotiations focused on efforts to alleviate this burden, leaders faced pressure from Mediterranean countries to bring in caps on energy prices.
According to the European Commission’s analysis of this, this would lower prices but could jeopardise security of supply. But these efforts floundered under pushbacks on market reform, particularly from Germany.
“Germany and many other countries are very sceptical when it comes to market intervention,” German Chancellor Olaf Scholz told journalists after the summit.
Berlin does not believe that market intervention will provide long-lasting effects, he said, adding it would be better to wait for the European Commission to come up with an analysis.
The conclusions adopted by EU leaders put the ball back in the Commission’s court on tackling high prices and wider energy market reform.
In the short term, to alleviate high prices, the leaders called on the Commission to work alongside them in discussing with energy stakeholders how certain measures “would contribute to reducing the gas price” and their impact on the electricity market.
The measures mentioned were suggested in the Commission’s communication on reducing reliance on Russian gas and include direct support, state aid, taxation changes, price caps and other regulatory measures.
For wider market reform, the Commission is also called upon to “submit proposals that effectively address the problem of excessive electricity prices while preserving the integrity of the single market.”
“Energy security and climate neutrality can only be achieved if the European Union relies on a robust and fully interconnected internal electricity market and a well-functioning carbon market,” the conclusions read, inviting the EU executive to take any “necessary initiatives” based on an expected report on Europe’s energy market by May.
“By May, we will have a proposal from the Commission on the possibility of unbundling the formation of the price of electricity from that of gas,” said Italy’s Prime Minister Mario Draghi.
Victory for Spain and Portugal
While this is certainly not as far as Spain, Portugal, Italy and Greece wanted to go, the perseverance of the Iberian countries was rewarded after what Scholz called a “good job” by Madrid and Lisbon.
All EU countries can ask the European Commission to assess the compatibility of their “emergency temporary measures” to tackle high energy prices, which will analyse whether these reduce the price and their impact on trading conditions, taking into account their temporary nature and the level of interconnectivity with Europe’s electricity market.
But Spain and Portugal are in a very different situation to the rest of the EU, with few connections to the rest of the bloc and higher than average renewable energy generation.
Because of their unique situation, leaders “agreed on a special treatment” for them to deal “with this very specific situation they are in and manage the electricity prices”. For Spain and Portugal, this could translate into free rein due to their lack of interconnectivity with Europe.
“Voluntary” gas purchasing
The conclusions also included measures regarding Europe’s gas supply, reaffirming a commitment made by EU leaders in Versailles to break away from Russian fossil fuels “as soon as possible”.
They also agreed with the Commission that “refilling of gas storage across the Union should start as soon as possible, taking fully into account national preparedness measures”.
The most controversial area around gas was joint purchasing, which would enable EU countries to band together and bid more competitively.
Before the discussions started, the Bulgarian and Belgian leaders called for joint purchasing of gas, something several EU countries have pushed for since the energy crisis began to bite last autumn.
“If we look at the gas market, the pipeline gas market, 75% of the global pipeline gas market is the European market. So we have an enormous purchasing power,” said European Commission President Ursula von der Leyen.
But her home country, Germany, was not so keen, watering down this idea as well and noting that their system of “private economic actors who do the gas purchasing” is already working.
As a result, such a measure is now “voluntary” in the conclusions – a key change from leaked draft versions seen by EURACTIV.
However, EU leaders who had wanted this were still pleased. Bulgarian Prime Minister Kiril Petkov told journalists after the summit that the decision for collective gas purchases from Gazprom was a “victory for the Bulgarian interest”.
It is also a victory for countries in the Western Balkan and the three associated Eastern Partners [Ukraine, Georgia, Moldova] as they will be allowed to participate in joint purchasing.
Von der Leyen welcomed the move, saying: “We will now use our collective bargaining power. Instead of outbidding each other and driving prices up, we will pull our demand.”
[Edited by Zoran Radosavljevic]