‘Vital work nonetheless to be achieved’ on European fuel value cap proposals

Subsequent EU Council on Oct 20

Deeper reform ‘six months away’

EFET warns of damaging knock-on results

The European Fee has vital work to do on the design of a fuel value cap forward of the following EU Council on Oct. 20, Irish Prime Minister Micheal Martin mentioned following a casual EU heads of state assembly in Prague Oct. 7.

Fuel costs have fallen in current weeks on the again of slowing storage wants, liquidity assist and a drive by the European Fee to intervene to restrict vitality value will increase.

Europe’s fuel value benchmark, the TTF month-ahead contract, traded Oct. 7 beneath Eur160/MWh, greater than 50% decrease than peaks seen in late August.

“Very vital work must be achieved by the European Fee forward of the following Council” on the way to restrict fuel costs, whereas proposals to reform the wholesale vitality market, delinking fuel costs from energy costs, might take an extra six months, Martin mentioned following the summit.

EC President Ursula von der Leyen mentioned there have been three measures being labored on: a “hall of first rate fuel costs with our dependable suppliers, with talks underway with Norwegian firms; a restrict available on the market value of fuel, taking out the peaks and hypothesis on the TTF degree; and a partial decoupling of fuel costs within the formation of energy costs.”

This final level was a primary step in a far-reaching market reform proposal that may not be prepared earlier than the top of the 12 months, she mentioned.

In the meantime there was broad settlement that by subsequent spring, “it’s paramount that we’ve joint procurement of fuel and we keep away from out-bidding one another,” she mentioned.

“The Single Market is our greatest asset, we should keep away from fragmentation,” von der Leyen mentioned.

Fifteen EU member states are reported to again a Europe-wide cap on fuel costs, whereas Poland, Belgium, Italy and Greece have proposed a fuel value hall.

Addressing the European Parliament on Oct. 5, von der Leyen mentioned assist was constructing for a fuel value cap however acknowledged there have been drawbacks.

“Such a cap on fuel costs have to be designed correctly to make sure safety of provide. And it’s a non permanent resolution to cater for the truth that the TTF — our foremost value benchmark — is now not consultant of a market that features extra LNG at the moment,” she mentioned.

Long term, a brand new EU fuel value index would guarantee higher functioning of the market, with the fee having “kick-started” work on this, she mentioned.

Clear downsides: EFET

The European Federation of Power Merchants warned Oct. 6 {that a} fuel value cap might result in necessary rationing.

“The fuel value is presently being set by the demand aspect, not the provision aspect. Costs rise to a degree the place customers self-interrupt, swap to different fuels, or put money into different vitality saving measures,” it mentioned.

With out this sign, consumption can be increased, and any shortfall must be resolved through curtailments.

In the meantime excessive costs on the Dutch TTF relative to worldwide LNG costs have been an indicator of lacking interconnections and/or regasification capability, not a damaged market as claimed by von der Leyen.

The value sign needs to be maintained to incentivize new regasification capacities the place these might be delivered rapidly, and to resolve bottlenecks, EFET mentioned.

The fuel cap assumes firms can be compelled to transact at or beneath the value ceiling, the federation mentioned.

In actual fact it might put contracted and future deliveries in danger.

“LNG contracts in lots of circumstances happen outdoors EU jurisdiction (and certainly, sellers might insist that future contracts happen in worldwide waters). An importer might redirect cargoes outdoors Europe slightly than commerce at a loss towards a decrease cap. The consequence can be a threat to safety of provide,” it mentioned.

Commissioner for Power Kadri Simson is to go to Algeria Oct. 10-11 as a part of EU efforts to diversify vitality provide away from Russian fossil fuels, the EC mentioned Oct. 7.

The journey features a bilateral assembly with Algerian vitality minister Mohamed Arkab and an EU-Algeria vitality enterprise discussion board.