(Bloomberg) – European Commission President Ursula von der Leyen has promised “urgent intervention” in the bloc’s runaway electricity market, but diplomats say any major measures will take weeks to develop and implement .
The executive body of the EU is still working out various scenarios for how the EU will try to reduce electricity prices, which is about 2022 several times higher than a year ago, diplomats said.
When European energy ministers gather in Brussels on September 9 for a special meeting, their aim is to reach a political consensus on how the EU should act, leaving regulatory details for later deal with. Another important clue may emerge when von der Leyen delivers his annual State of the Union address in September. 14.
“We need tools where emergencies can be triggered very quickly in a few weeks,” von der Leyen said Monday evening in Berlin. “After that, there has to be a deep structural reform of the energy market. I think that will happen early next year.”
Despite the lack of details, the mere announcement of the intervention plan caused electricity prices to plummet on Tuesday . Next year Germany Electricity fell by 26%, while Dutch Gas Down some 11%. Both benchmark contracts extended losses from Monday after surging to record levels last week.
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But EU now faces uphill task of trying to devise a solution 27 Countries with different energy sources and needs can agree.
The Czech Republic, which holds the EU presidency, is proposing to cap the price of natural gas used for power generation and is working to get others on board. In recent months, other countries, including Italy, which has called for a cap on the price of gas imports from Russia, have been suggesting different measures. Greece proposes to separate renewable, hydro and nuclear power generation from fossil fuel power generation when setting electricity prices.
Windfall Profits Tax
German Economy Minister Robert Habeck proposes a tax on excess profits to help companies and how consumers respond to price shocks.
“This transition period should be used to write off some of these excess profits,” he said Monday night. “These companies will still make the money, but it will then be taken away and used to maintain social cohesion and provide any assistance to the company until we develop and implement a new market design.”
once the EU has identified a particular path, it may be implemented in the form of regulations that can be fast-tracked, but it may still take at least a few weeks to draft, review and approve.
Von der Leyen also said it was time for the commission to develop a long-term plan to decouple electricity prices from natural gas.
“We need to balance two things: of course, the seriousness of the situation and the consequences for consumers and the industry,” European Commission chief spokesman Eric Mamer told reporters on Tuesday . “However, on the other hand, there needs to be recommendations that fit the complexity of our energy markets, especially our electricity markets. So it’s important that we take the time to come up with recommendations that address these two different dimensions.”
French President Emmanuel Macron also renewed his call for reform of the EU electricity market on Monday, saying his goal was to create a market “unaffected by speculative elements” with a new pricing formula.
Diplomats said the drafting process for the more ambitious plan could begin later this year, with a thorough study of its potential impact a first step. A legislative proposal could be introduced next year, a process that typically takes up to two years to turn into binding law.
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