The European Union is preparing an “emergency intervention” in its energy market to drive down ballooning power prices, European Commission president Ursula von der Leyen said on Monday.
“The skyrocketing electricity prices are now exposing the limitations of our current electricity market design. It was developed for different circumstances,” she said in a speech at the Bled Strategic Summit in Slovenia.
“That’s why we are now working on an emergency intervention and a structural reform of the electricity market.”
Ms Von der Leyen’s statement was discussed at a two-hour meeting of senior Government ministers in Dublin, as was the plan to convene an extraordinary energy council of ministers from the 27 EU member states next week. Minister for the Environment and Green Party leader Eamon Ryan will attend.
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Taoiseach Micheál Martin met Mr Ryan and Minister for Finance Paschal Donohoe to discuss energy security, price and supply, and how energy prices had “grown significantly over the past number of weeks especially,” one source said. There is growing concern in government over the scale of the challenge this winter.
Ministers discussed ways to alleviate the impact on people and businesses after employers’ group Ibec warned that businesses were coming under intense pressure from energy costs, and called for enhanced supports. The Department of Enterprise said it was developing a loan guarantee scheme, with a grant scheme already having received competition clearance from Europe. However, senior Government sources sought to manage expectations, saying the schemes would be less wide-ranging than their pandemic equivalents.
Spiralling energy costs are the main factor in rising inflation around Europe, leading to calls for energy price caps amid fears of social unrest.
“We must fix the energy market,” wrote Czech industry and trade minister Jozef Síkela as he announced the emergency energy council convened by the Czech presidency of the EU. A solution found by all 27 member states would be “by far the best we have”.
The details of potential reform of the EU’s energy market are currently unclear. Commission officials are developing proposals to put before member states for their consideration later this week.
Germany and Austria are among the countries to support decoupling the cost of gas from wholesale electricity prices. Senior sources in Dublin indicated tentative support for such measures, one saying it would be a “no-brainer”.
Currently, the price of gas sets the minimum cost of energy in the EU’s wholesale electricity market through a marginal pricing system.
At the time of the system’s design, gas was considered a cheap and reliable fuel that would act as a fail-safe whenever electricity from renewable sources was insufficient.
But the steep rise in gas prices since Russia began preparing its invasion of Ukraine and the threats from Moscow to cut gas supplies to EU member states have revealed the risks of using the fuel as a benchmark. Mr Ryan will tell an Oireachtas committee on Tuesday that the price of gas is “the biggest energy challenge facing Ireland and Europe”.
To cope with soaring energy prices, EU member states have rolled out a series of national interventions to help households and businesses. Mr Ryan will tell the committee that government “recognises more needs to be done” in the forthcoming budget.
The EU also agreed a voluntary target to cut national gas use by 15 per cent to reduce demand. But as winter approaches with its greater demand for home heating and energy use, an increasing number of countries have backed calls for EU-level intervention in how the market works.
On Monday the Belgian government indicated it would support an energy price cap, the latest in a series of countries to do so.
