It has not been easy, much less fast. But a year later, with a war going on and with inflation that has exceeded double digits, the European Union finally seems to have decided to take charge of the energy crisis.
This is what emerges from the latest package of measures proposed by the European Commission and which on September 30 received the approval of the energy ministers of the member states. Measures that now do aspire to channel high energy prices, although the magnitude of the crisis raises fears that they will surely not be enough.
Pedro Sánchez together with the Prime Minister of Portugal, António Costa.
The proposal for a European Regulation for an emergency intervention to address high energy prices is deployed on different fronts of action.
The first of them is the reducing energy demand. The norm establishes an indicative objective of reduction of 10% of the total monthly gross consumption of electricity. In hours with peak demand, this reduction will have to be at least 5%.
In both cases, the Member States have room to choose how to achieve these objectives. Spain has already announced that, in its case, this savings effort during peak hours will focus on industrial consumption, through a new active demand response service regulated in Royal Decree Law 17/2022, of September 20. This system essentially recovers and updates the old interruptibility auctions, de facto suspended since 2019.
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The second refers to the so-called “heavenly benefits” that renewable and nuclear technologies obtain in the wholesale electricity market. The proposed European Regulation establishes a remuneration limit in the electricity market for renewable and nuclear technologies of €180/MWh. The income that exceeds this threshold will be subtracted by each Member State, which must allocate them to reduce the electricity bill.
In reality, this is a very generous limit, considering that the average price offered by inframarginal technologies was around €48/MWh in the 2020-2021 period. In fact, a similar mechanism has been operating in Spain since 2021, regulated by Royal Decree-Law 17/2021, of October 14, and its subsequent amendments, still in force.
“The criteria of the European solidarity contribution present notable differences with the proposal for a temporary Spanish energy tax, which is calculated on income, and not on profits”
Another of the proposals of the new community regulation, and perhaps the one that has received the most attention, is the creation of a solidarity contribution by fossil companies. As a consequence of it, oil, natural gas and coal companies will have to pay the equivalent of 33% of their extraordinary profits in 2022 and/or in 2023, considering as such those that exceed the average of more than 20% of benefits obtained by each company during the years 2018, 2019, 2020 and 2021.
The income obtained as a result of the contribution must be used either to finance investments in energy efficiency and savings or to promote the deployment of renewables or to lower the price of energy products by certain groups, such as domestic consumers in situation of vulnerability or the electro-intensive industry.
The criteria for this European solidarity contribution, by the way, in some cases present notable differences with the proposal for a temporary Spanish energy tax that is currently being processed by the Congress of Deputies. Without going any further, while the Spanish benefit is calculated on income, the European does so on benefits, that is, once costs have been discounted, which in some cases can be significant.
It is true that the final wording of the European Regulation finally leaves some room for maneuver for the Member States to transpose this contribution, and even allows maintaining those already in force under the same terms, as in the case of Italy. But the Spanish energy tax, as it is still not approved, will necessarily have to be adapted during its processing to comply with European requirements. A commitment that the Government has already transmitted but that it is up to the parliamentary groups present in Congress to make it a reality.
“Beyond the discussion about whether they are sufficient to deal with the crisis, other problems associated with the risk of political division and fragmentation of the single European market have surfaced”
Between this solidarity contribution from fossil fuels and the limitation on the remuneration of renewables, the European Union hopes that more than 140,000 million euros will be collected in total that the Member States can allocate to reduce the electricity bill of their consumers.
But, beyond the discussion about whether they are really enough to be able to face the magnitude of the crisis that affects us, the debate on these measures has brought to the surface other problems associated with the risk of political division and fragmentation of the single European market.
An example of this division can be seen precisely in one absence: that of an agreement to establish a cap on gas on a European scale. For weeks now, more and more countries have advocated setting a maximum price for gas imports arriving in Europe. Spain, Portugal, France, Italy or Belgium, among others, are part of the group of countries that request that this measure be taken to mitigate the impact that gas prices have on European electricity markets.
On the opposite side is Germany, for whom gas continues to be a very relevant technology within its energy mix and also for the operation of its industrial fabric. The discrepancies between the two blocks have prevented this measure from being part of the measures agreed by the EU, at least for now.
“Ideally, efforts to contain the energy crisis would be channeled at a European level, avoiding competition and uncoordinated actions between the different Member States”
Divergences also persist regarding other important issues, such as that of energy interconnections at the community level, in particular that represented by the MidCat gas pipeline between Spain and France, a strategic infrastructure for our country. Although it is true that in recent weeks both countries have moved closer to the greater French willingness to this project after the incidents that would have affected the NordStream gas pipeline between Russia and Germany through the Baltic Sea.
Secondly, the risk of economic fragmentation has increased after the announcement by the German Government of its intention to allocate more than 200,000 million euros, 5% of its GDP, to lower the electricity bill paid by its consumers. A measure that has put the community institutions on alert and that has raised criticism from various countries, including France, Italy and Spain, which accuse Germany of lack of solidarity for being reluctant to support measures at European level, such as the cap on gas , which pursue purposes analogous to those that the Germans are willing to deploy exclusively for them. Especially considering that not all countries have such a high fiscal margin to allow such a policy.
[Sánchez y Macron acuerdan enterrar el Midcat y sustituirlo por “un corredor verde” entre Barcelona y Marsella]
There will be those who argue that this fact alone legitimizes the German decision. But it is no less true that this German fiscal margin is largely the result of an export-oriented economic model that has traditionally been endorsed and even stimulated by the EU itself, not infrequently at the expense of the interests of other countriesas was clearly seen in the financial crisis of 2008.
Similarly, these countries also criticize the unilateralism of the German decision, even more serious considering the distortions that such a massive subsidy program can have on the European economy. The cap on Iberian gas was scrutinized and even restricted, thus limiting its potential positive impact, under the justification of minimizing the possible damage that this mechanism could have on industrial competitiveness. The German plan, in fairness, should not be treated differently.
In any case, and regardless of how the controversy generated by Germany ends up being resolved, the ideal would be for the efforts to contain the energy crisis, insofar as it has a European scope, to be channeled equally at that same European scale, avoiding competition and uncoordinated actions between the different Member States.
*** Ramón Mateo is the director of beBartlet, a public advocacy office.
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Source: Elespanol
