Response to the gas crisis: Europe will reform the electricity market

Alexander Akhtyrko

Gas prices in Europe at the opening of trading on October 6 rose to a new all-time high, exceeding $ 1600 per 1,000 cubic meters. m. Against this background, representatives of France, Spain, Czech Republic, Romania and Greece issued a joint statement, which called for an investigation into the situation with a sharp increase in gas prices. The authors of the document consider it necessary to reform the EU electricity market – the European Commission has already promised to submit relevant proposals by the end of 2021.
Five countries of the European Union have proposed to investigate the reasons for the record jump in gas prices in Europe. This is stated in a joint statement by the Ministers of Econ-omy and Finance of France, Spain, Czech Republic, Romania and Greece.
“With regard to gas, the functioning of the European gas market should be investigated in order to understand why the current gas contracts were insufficient,” the text says.
The representatives of these countries also called for the establishment of common rules on the volume of gas reserves in order to mitigate price surges in the future. In particular, we are talking about “increasing coordination in procurement in order to improve the overall position.”
The authors of the document also consider it necessary to reform the EU electricity market – “to improve the relationship between the cost of electricity generation and its final price for consumers.”
In addition, Paris, Madrid, Prague, Bucharest and Athens indicated the need to link electricity tariffs with the emissions trading system in force in the EU. This will accelerate the transition to greener sources of electricity, as it will increase the cost of coal, the statement said.
In turn, the European Commission said that by the end of the year they will submit proposals on reforming the gas market.
New records of gas prices
The gas price in Europe at the opening of trading on October 6 rose sharply to a new all-time high, first exceeding $ 1,500 and then $ 1,600 per 1,000 cubic meters. m, according to the data of the ICE exchange.
Gas prices in Europe are rising despite the news that testing of the first string of the Nord Stream 2 gas pipeline has begun.
Gas reserves in European storage facilities remain at a minimum. Gazprom expects that the winter of 2021-2022 will be cold and snowy.
The gap in occupancy compared to last year is estimated at 20.5 billion cubic meters. m of gas. If the average daily September injection rates remain unchanged by October 12 (on that day in 2020, extraction began), the storage facilities will have about 76 billion cubic meters. m of gas. Thus, 28%, or 18.6 billion cubic meters, will remain unreplenished. m of gas from 66.2 billion cubic meters. m, selected from European UGS facilities during the last heating season.
Alexey Miller, Chairman of the Gazprom Management Committee, previously noted that a strong lag in gas injection into underground storage facilities in Europe and growing demand have led to the fact that prices have broken records and may rise even more in the near future.
Commenting on the situation, Russian President Vladimir Putin said the day before that “confusion and hysteria” are observed on the fuel markets in Europe.
“You see what is happening in Europe, there is hysteria and some kind of confusion in the markets. Why? Yes, because no one takes it seriously, someone speculates on the problems of climate change, someone underestimates something, someone starts to cut investments in the extractive industries, ” TASS quoted him as saying .
Hope for Nord Stream 2
The commissioning of Nord Stream 2 would allow Europe to receive an additional 55 billion cubic meters. meters of gas per year. The gas pipeline consists of two lines with a length of 1.2 thousand km, they run from the port of Ust-Luga (Leningrad Region) to Greifswald (Germany).
On August 25, the Supreme Land Court of Düsseldorf rejected an appeal by Nord Stream 2 AG in a dispute over the withdrawal of the project from the EU Gas Directive. The court upheld the decision of the German Federal Network Agency (BNetzA, the German energy regulator), which declared the gas pipeline non-compliant with the EU’s third energy package.
In accordance with this requirement, Gazprom can use only half of the declared gas pipeline capacity of 55 billion cubic meters. m per year. Nord Stream 2 AG will appeal the agency’s decision to the Supreme Federal Court.