Statement by President von der Leyen on the subject of energy – The European Stich – Critical News & Insights on European Politics, Economy, Foreign Affairs, Business & Technology

(Image credit: Unsplash)

This article is brought to you in partnership with the European Commission.

We are in an exceptional situation, not only because Russia is an unreliable supplier, as we have seen over the past few days, weeks, months, but also because Russia is actively manipulating the gas market. I am deeply convinced that we will win with our unity, our determination, our solidarity. And we have greatly increased our preparedness and weakened Russia’s hold on our economy and continent in the last six months of this war. As you recall, we did three things. The first was to reduce demand. Demand reduction, i.e. storing gas in order to save it in storage. We have created a common camp and that is really a success story because now we are already at 82% with the common camp in Europe. As you know, our goal was to reach 80% by the end of October. So we overshoot, and that’s a good thing.

The second step we took was: Diversify away from Russian fossil fuels. And you know that we stopped importing Russian coal. We are winding up the Russian oil. And we have worked very hard to diversify away from Russia to other reliable suppliers, such as the United States or Norway, Azerbaijan, Algeria and others. In fact, Norway now supplies more gas to the European Union than Russia. And we’ve been able to, if you look at the cuts that Russia has made on gas, we’ve been able to fully offset the gas imports through other reliable suppliers so far.

And of course the third step is the most important. These are massive investments in renewable energy. We have REPowerEU on the table. The renewables are cheap, they come from our own cultivation, they make us independent. This year we will use renewables equivalent to around 8 billion cubic meters. So, renewables really are our energy insurance for the future.

However, we also see that the Russian manipulation of the gas market has spillover effects on the electricity market. So there’s the Russian manipulation, but there are other factors this summer as well. We see the effects of climate change. We see the drought. Hydropower has been reduced by 26% in the European Union and by 46% in Portugal. And we have the fact that we currently have less nuclear power in the European Union. And that is why we are now faced with astronomical electricity prices for households and businesses and enormous market volatility. Therefore we will propose a package of five different emergency measures.

The first is intelligent power saving. What has changed over the summer due to the elements I just mentioned is that we are seeing that there is a global energy shortage. So whatever we do, one thing is certain: we need to conserve electricity, but we need to conserve it intelligently. If you look at the electricity costs, there are peaks in demand. And that is expensive, because the expensive gas comes onto the market during these peak loads. So we need to flatten the curve and avoid peak loads. We will propose a binding target to reduce peak-time electricity consumption. And we will work very closely with Member States to achieve this.

The second measure: We propose capping the revenues of companies that produce electricity cheaply. The low-carbon energy sources are making enormous revenues in these times – because they have low costs but high prices on the market. Income they never expected; Earnings they never dreamed of; and income that they cannot reinvest to that extent. These earnings do not reflect their production costs. Therefore, now is the time for consumers to benefit from the low cost of low-carbon energy sources such as renewables. We will propose diverting these windfall gains to Member States so that Member States can support vulnerable households and businesses.

The third measure is that the same is true, of course, for fossil fuel companies’ windfall profits. Oil and gas companies have also made massive gains. Therefore we will propose that there is a solidarity contribution for fossil fuel companies. Because all sources of energy must help to overcome this crisis. Member States should invest this revenue to support, as I said, vulnerable households and vulnerable businesses, but also to invest in clean domestic energy sources, such as is the case in renewable energy.

The fourth point is aimed at the energy supply companies, which need support in order to be able to cope with the volatility of the markets. This is about hedging futures markets. And that requires liquidity. These companies are currently being asked to provide unexpectedly large amounts of money, which not only endangers their ability to trade but also the stability of the futures markets. It’s a liquidity problem. Therefore, we will help to facilitate liquidity support from Member States for energy companies. We will update our preliminary framework, allowing for rapid deployment of government guarantees.

The fifth and final point: we want to reduce gas costs. Therefore, we will propose a price cap for Russian gas. The goal here is of course very clear. We all know that our sanctions dig deep into the Russian economy and have severe negative effects. But Putin is partially buffering with revenues from fossil fuels. So here’s the goal: we need to cut Russia’s revenue, which is used to fund Putin’s horrific war in Ukraine. And now our work over the last few months is really paying off. Because at the beginning of the war, if you look at the imported gas, it has long been 40% Russian gas. Today we are only at 9%.

So those are the five actions that we will be discussing with Member States at Friday’s informal Council of Energy Ministers. These are tough times and they won’t be over anytime soon. But I am deeply convinced that if we show solidarity, unity and determination, if we have economic strength, if we have political will, then we will win.

Like this:

As Loading…

Related