Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

EU cautions against gas price cap for electricity - document

Published 10/24/2022, 05:50 PM
Updated 10/24/2022, 05:56 PM
© Reuters. FILE PHOTO: Model of natural gas pipeline and EU flag, July 18, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

© Reuters. FILE PHOTO: Model of natural gas pipeline and EU flag, July 18, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

By Kate Abnett

BRUSSELS (Reuters) - The European Commission has warned countries that an EU-wide cap on the price of gas used to produce electricity could cause an increase in gas use and exports of EU-subsidised electricity, according to a document seen by Reuters.

European Union countries' energy ministers meet on Tuesday to discuss options to cap EU gas prices, with countries still split over whether and how to do this after discussing it for weeks.

The document shows that the Commission shared with countries an analysis of a price cap for gas used to produce power - a scheme that Spain and Portugal launched this summer after Russia's invasion of Ukraine and subsequent cuts to EU gas supplies pushed up energy costs.

Rolling this out EU-wide - an idea France has championed - could see gas EU demand rise by up to 9 billion cubic metres, the document said.

It would also require measures to prevent the resulting cheaper electricity from flowing to non-EU countries like Britain and Switzerland that do not have the price cap, the document said.

Germany and the Netherlands have warned that price caps to make gas cheaper could cause a spike in consumption at a time when countries are racing to save fuel and replace Russian deliveries. Russia supplied 155 billion cubic metres of gas to the EU before the invasion.

The Commission said if market gas prices were 180 euro per megawatt hour for a year, the scheme could yield a net benefit of 13 billion euros ($12.8 billion) and help to tame inflation - but that the benefits would not be evenly spread. Gas prices have tumbled far below that level in recent days, amid mild weather and brimming storage tanks.

France - a net importer of gas-fuelled electricity - would be the biggest beneficiary of the power sector gas price cap, the document said.

© Reuters. FILE PHOTO: Model of natural gas pipeline and EU flag, July 18, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

Germany, the Netherlands and Italy, who produce significant volumes of gas-fuelled power, would face the highest costs to fund the scheme, said the document, which did not specify how the EU-wide mechanism would be financed.

($1 = 1.0131 euros)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.