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September is just around the corner and Europe can no longer deal with electricity prices. Germany, Italy, Austria, Belgium or France are getting used to paying the megawatt hour above the 600 euros, while insisting that “the worst is yet to come” this winter. An unsustainable situation that has led them to demand an emergency intervention from the European Comission similar to the ‘Iberian exception’ that Spain and Portugal have enjoyed since June.
Brussels has accepted the request. The European Commission is working on a formula similar to the ‘Iberian exception’ and that is expected before September 9, which is when the energy ministers. The reaction of the team Ursula Von der Leyen comes after Germanythe great opponent until now of any reform of the European electricity market, accepts that an intervention in the market and a subsequent reform is the best way to face the punishment that detoxifying from Russian gas is causing.
Von der Leyen reacts to the cry for help from its main economic engine. Gas prices exceeding 300 euros and a wholesale electricity market close to 700 euros megavative/hour have led Germany to change its mind five months later. The German chancellor, Olaf Scholz, was the main enemy in the European Union of the ‘Iberian exception’ that Pedro Sánchez presented on March 25 at the European Council. From Moncloa it is defended that that council was of extreme intensity due to the German refusal, that the president had to leave the room due to the entrenchment of the countries of central Europe and that, finally, the measure went ahead due to its protagonism
Portugal may not agree so much with that version of events, as the move is and always will be a joint ‘victory’. Although Moncloa has taken a few hours to spread the idea of ”we already said it.” Sánchez will be sitting next to Olaf Scholz on Tuesday in an extraordinary session of the German Council of Ministers. Both parties have joined energy positions in recent times with the possibility of accelerating the midcat pipeline so that Germany can access the gas that arrives in Spain as soon as possible. But he will not waste the opportunity to celebrate in Scholz’s face his change of heart on market intervention.
Germany asks Europe for a solution with aromas to the ‘Iberian exception’ for this winter and will face the next one, which also promises to be dizzying, under the presidency of the EU Council of Spain. Sánchez arrives grown up this Tuesday during his visit to the German government. He will probably have time to explain to the Germans that market intervention with The cap on gas in Spain is giving consumers the first scares who have already renewed or who have signed new contracts with a fixed electricity price. Because the compensation to the gas ceiling represents about 40% of their bills and has triggered the rate.
What is Europe going to do?
Von der Leyen has said they will intervene, but not how. Industry experts believe that a gas cap, similar to the ones in Spain and Portugal, would be the easiest model to replicate since it takes two months of testing in the region. It can even be perfected.
This movement would cause distortions on the border with France, one of the most complex aspects in the negotiation in Brussels of the ‘Iberian exception’. If all the countries of Europe set a cap on gas, the Commission should buy Spain’s initial plan to have one price for national consumption and another for exporting to France. Because, if they don’t, the interconnection congestion charge, the way France compensates Spain for these prices, stops working. Without it, then there would be a subsidy from one country to another.
The route of capping the price of gas for the production of electricity for the whole of Europe, which limits the main culprit of the high electricity prices throughout the continent, is what has the most force. Thus, Brussels is preparing the ground for a possible scenario of direct intervention in the gas marketwhich de facto would imply starting up the centralized management mechanism.
Experts already say that this formula would require Europe to assume and finance the cost of the measure centrally with European aid. The only certain thing is that a market intervention, which is more favorable than the cap on gas that Spain and Portugal have, would cause both countries to demand a new agreement for their exception. The intervention that Brussels promises will have a domino effect that, like the cap on gas, and for some, will be worse ‘the cure than the disease’.
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