Montel Magazine 3 2022 - Pipeline sabotage 3 - Page 25

“ Governments should focus first on balancing supply and demand by saving gas and power ”

EU unveils unprecedented intervention

Europe ’ s looming energy crisis this winter is prompting a slew of emergency measures .
By Siobhan Hall
From proposed limits on how much revenue lower-cost power generators can keep to persistent debates on potential gas price caps , European policymakers are rushing to find ways to mitigate the impact of soaring energy prices on users .
The problem started last year with low gas storage levels nudging up gas prices ahead of winter . Fears of tightening supply were compounded earlier this year by Russia ’ s invasion of Ukraine – which eventually saw Europe ’ s biggest gas supplier cut the taps – driving wholesale prices to all-time highs . This in turn has pushed power prices to record highs as expensive flexible gas-fired plants are often the last ones brought online to meet demand under the EU ’ s merit order rules .
Montel Magazine 3 – 2022
In response , the European Commission proposed in mid-September capping the revenues of power plants not using gas or hard coal at EUR 180 / MWh this winter . If wholesale power prices went above this , national governments would be able to skim off the excess earnings and use them to support end users . The EC reckons the plan could raise more than EUR 117bn for the bloc ’ s 27 member states to support households and businesses .
How governments would do this in practice is not defined in detail . The proposal says governments should calculate the revenues above EUR 180 / MWh after the market has cleared as normal . This means using the merit order to ensure the cheapest plants are used first to meet demand in the spot markets .