In the news: focus on energy
Wherever one looked this week, the only think you could hear was the energy crisis. As fuel and electricity prices rises, governments are introducing mitigation measures, what is Europe's response?
📈 Energy prices rise everywhere in Europe
The situation is bleak: all European countries have a major problem in energy prices, both fueled by the increase of gas prices and the rarefaction of Russian supplies. The winter ahead does nothing to reassure citizens and their leaders.
Slovakia fears its schools could close this winter due to the difficulty to heat classrooms. Electric Ireland annouced that Irish electricity bills are expected to rise by 27% , and gas bills by 37%.
The situation is so dire that it already has serious political implications in some countries. In Czech Republic, the lower chamber of the parliament started its Thursday session with a vote of no-confidence against the current government for its poor handling of the energy crisis. Althoug the motion is likely to fail, it paves the way for similar actions in Europe.
In Vienna, Austria, the poor financial state of the city’s energy operator cause serious issues between the current social democrat major and its liberal coalition partner, as well as the federal-governing Greens. Both the city of Vienna and the state agreed on a €2 billion state loan to refloat Austria’s larger energy supplier, Euractiv reported yersterday.
📝 Governmental measures
The range of actions varies from country to country, as well as the measures taken so far. Let’s have an overview of decisions taken by individual member states.
Energy price caps
Slovakia’s energy minister proposed the introduction of a gas price cap for households and could expand it to electricity. Romania extended its year-long energy price cap measure. Initially set up to cover 2021’s cold season, the cap was extended after the war in Ukraine, before this week’s extension.
Reduced taxation
From October until the end of 2022 at least, Spain will see the VAT on gas drop from 21% to 5%, although the country is not as reliant on gas compared to other European nations.
Other supply sources
Another way, explored by known-gas-addict Germany is to… process more gas. As Russia cuts its pipeline to Germany, the latter announced it arranged for a fifth floating LNG (liquified natural gas) terminal. Euractiv reported that only 70 of such boats exist in the world. Since the beginning of the war in Ukraine, Germany steadily increase its import of LNG, mostly for the United States.
Better use of the available energy
In Bosnia-and-Herzegovina, the authorities urged citizens and businesses to use energy “rationally”. State-owned companies were ordered to draft savings plans.
Belgium’s public buildings are required to reduce the use of air conditioning, to turn heating only up to 19 degrees Celsius. Lighting in public buildings must be switched off between 7 p.m. and 6 a.m., among other measures.
Talks with Russia
But the palm of all measures goes back to usual suspect Hungary. It probably was not enough for ruling Prime Minister Orban to show little support to Ukraine. Foreign Affairs Minister Péter Szijjártó said Russia’s Gazprom would deliver up to 5.8 million cubic meters more natural gas per day via Serbia (another of Russia’s side-kicks) on top of additional volumes agreed in a 15-years contract.
Bulgaria is considering a similar path.
🇪🇺 The EU’s responses
All national leaders expect a decisive response from the EU. Energy ministers will gather next week to discuss a plan proposed by the European Commission.
On Monday, European Commission President Ursula von der Leyen said the Commission would propose an "emergency intervention" to answer price spikes, along with a reform of the electricity market, which could be completed by early 2023.
According to a leaked document, the Commission is considering the solution of an electricity price cap, as part of a set of “short-term emergency interventions tackling electricity demand and high electricity prices.”
The non-paper evaluates ideas to bring down the price of electricity. It concludes that the two best ones that warrant action are to reduce energy demand and to put a cap on electricity prices.
On Friday 9 September, EU energy ministers are expected to grant the Commission a mandate to prepare interventions into the EU power market around those lines.