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Europe opens to separate the price of electricity from gas in the midst of the war crisis

The European Commission, until now reluctant to intervene in the energy markets, has opened this Tuesday to limit “temporarily” the automatic contagion of the cost of gas to the price of electricity. “To address the spiraling energy prices, the Commission will study all possible options for emergency measures to limit the contagion effect of gas prices on electricity prices, as temporary price limits”. This has been announced by theto the Commission through a statement presented this Tuesday and collected by the Efe Agency.

However, Brussels more time is given despite this announcement, since it will not present a final proposal until it has the report prepared by the Agency for the Cooperation of Energy Regulators (ACER) and that will be known next April. The marginalist system that governs the European electricity market works in such a way that the most expensive generation technology sets the price of the rest of the sources at auction, so that electricity companies that produce little energy with gas but charge all their generation at that price you get what is known as “heavenly benefits.”

This is one of the measures included in a “toolbox” designed by the Commission to deal with the cost of energy, which is known when the megawatt is paid in Spain at an average price of 544.9 euros. Within these guidelines, also in relation to the electricity market, the Community Executive also proposes that the countries of the European Union be able to recover part of the “profits that fell from the sky” of the electricity companies, within a series of measures designed so capitals can cushion record energy prices.

“Member States may consider temporary taxes on the profits that have fallen from the sky” of electricity companies, as long as they are not retroactive and allow electricity producers to cover their costs and protect the market in the long term,” points out the Commission’s communication, which estimates the potential income for public coffers at 200,000 million euros.

Deployment of renewables

Brussels also seeks to accelerate the deployment of renewables, increase gas reserves and diversify supply sources to reduce the community’s dependence on Russia, which currently supplies 40% of the gas consumed by the EU, and emancipate the EU from fossil fuels. Russians by 2030. The European Commission’s energy “communication” will be one of the issues addressed by the heads of state and the Government of the EU countries at the informal summit scheduled for this Thursday and Friday in Versailles (France).

The President of the European Commission, Ursula von der Leyen, meets with the President of the Government, Pedro Sánchez, in La Moncloa, on March 5, 2022, in Madrid (Spain).  Von der Leyen's visit comes at the height of the crisis over Russia's invasion of Ukraine.  The European Union has already adopted three rounds of sanctions against Moscow and Spain also announced the shipment of weapons to Ukraine in order to defend itself against Russian forces.  The meeting takes place a few days before the informal summit of EU leaders in Paris, in which they were going to talk about economic growth and the development of European industry, but which will inevitably be dominated by tensions with Russia and the consequences for the European Union.  Ricardo Rubio / Europe Press 05/3/2022

Spain hopes that its measures will be included

The First Vice President and Minister of Economic Affairs and Digital Transformation, Nadia Calvino, hopes that the European Commission includes in the proposal that it plans to launch this Tuesday to deal with the rise in energy prices, some of the measures proposed by Spain. “I believe that more and more countries and institutions are aware that it is a priority problem and that we have to adapt our regulatory frameworks to respond to the extraordinary situation we are experiencing”the first vice-president pointed out in statements to the media, after closing the event ‘Legacy to the Caja de las Letras’, organized by the Cervantes Institute on the occasion of International Women’s Day.

Calvino’s first words

The proposal most defended by the Spanish Government throughout all these months is to decouple the price of gas from that of electricity, thus managing to avoid dependence on this type of fossil fuel. In this sense, Calviño has assured that the reduction of energy dependence on Russia is one of the priorities of the entire European Union, although he has explained that Spain starts from a relatively advantageous situation because it has diversified sources of supply, there is a significant presence of renewable energies and the country has a third of the regasification capacity of the entire EU.

Despite this, the vice-president has advocated accelerating the deployment of renewable energies and the energy transition so that, as soon as possible, the EU can stop depending on fossil fuels, be it oil or gas, that have a cost from the economic point of view, environmental and geostrategic. At the national level, the Vice President recalled that the Government is implementing a set of measures to cushion the negative impact on family accounts and the competitiveness of companies. The President of the Government, Pedro Sánchez, a few days ago announced an extension of the tax reductions already approved, an 80% reduction in charges for the electricity system for electro-intensive industries, a reinforcement of bonuses for the most vulnerable groups and a package to continue advancing towards energy that is as cheap and clean as possible.

“We are going to be very attentive to the decision adopted by the European Commission and I trust that within the communication they incorporate some of the proposals that we have been defending from Spain and that allow us to have a broader range of instruments to curb the rise in energy prices in the wholesale markets”, the vice-president remarked. However, the Government’s economic minister has insisted that Spain is one of the countries least exposed to this conflict, both from the energy and commercial point of view with Russia, as with its economic link with Ukraine.