Like the typical domino effect, the confrontation between Israel and Hamas that has put the situation in the Middle East at maximum tension is already having consequences in the field of energy, with lower activity at the liquefied natural gas (LNG) plant in Egypt. , which could raise the international price of this raw material. This is what the European Commission considers, although at the moment it believes that gas supply is guaranteed in the EU from each winter to next, it does not rule out that such an uncertain situation makes it necessary to resort for a longer time to the emergency measures agreed to last year. passed in the midst of a price crisis due to the war in Ukraine, among which is also the Iberian mechanism to limit the price of electricity in Spain and Portugal, which expires in December. Energy Commissioner Kadris Simson stated this Tuesday that Brussels is “willing” to extend them if necessary.
“The European Commission has evaluated the market and has come to the conclusion that, today, with 98% of storage [of gas in the Member States] there is no immediate risk of gas shortages facing the winter, he said Simson. Specifically, Spain's gas warehouses have been at 100% capacity since October 16, according to Commission figures.
However, he added that the situation is full of “uncertainty” with regard to the world market for liquefied natural gas (LNG), the one that most feeds the European market after last year practically completely cutting off gas transit. Russian, by gas pipeline. The uncertain situation, he indicated, could be the result of a supply cut in Australia or in “Egyptian plants”, which in recent years were supplied from fields in Israel, which has suspended for security reasons since the Hamas attack on last October 7th.
Brussels believes that this may have an effect “on gas prices” and the Energy Commissioner has stated that “we will consult with our services and if it is necessary to prolong the measures, we are willing to do so.”
Price and consumption caps
The Iberian mechanism that since June last year put a cap on the price of the energy used to generate electricity if the price of gas exceeded a certain threshold – first 40 euros MWh, currently 62 euros – is one of the emergency measures that authorized the European Commission to help EU countries alleviate the high price of energy on their homes and businesses. After a first extension, the electricity price cap expires on December 31, if there is no other extension which, without specifically mentioning this instrument, the commissioner has not ruled out this Tuesday. It is an aspect on which Spanish Government sources remain silent for the moment.
Other emergency measures – in this case, general for all countries – also expire at the end of the year: a reduction in gas and electricity consumption, the creation of a tax on the extraordinary profits of oil or gas companies or the limit of 180 euros MWh at which electricity from a renewable or nuclear source would be paid if gas rose above that price again. This last measure, which cost a lot to agree on in the EU and which has never had to be used afterwards, is the one that has just set a precedent for a possible extension of other measures.. The agreement on the reform of the electricity market that the Twenty-seven reached last week contemplates an extension of the cap of 180 euros for six months, until June 2024.
End to fuel aid
The Commission has opened the door to other possible extensions on a day of great activity in the field of energy, with the approval of the so-called “Wind Package”, with measures to promote and protect the European wind industry, and the presentation of the report of on energy in the EU in 2023 to take stock of the path taken towards the ecological transition and identify the challenges that still lie ahead.
Among these challenges is the need that the three members of the Commission responsible for Energy and Climate insisted on this Tuesday for EU countries to eliminate the subsidies they still give to gas and other fossil fuels, such as the discount to the fuel that remains in Spain for the transport sector.
According to the report, these subsidies – which go against the international commitments to reduce emissions and that the EU also asks of other regions and countries – increased significantly last year, during the energy crisis and are still in place in 50%. European governments continue to provide aid worth a total of 64 billion euros to their homes and industries.
“They increased last year due to the crisis but this has to change,” warned Climate Action Commissioner Wopke Hoekstra.. “Most subsidies are anachronistic and do not help the transition. Fuels with subsidies that do not address energy poverty or the just transition must be eliminated as soon as possible,” he urged.. In the Spanish case, the Commission estimates the 'allowed' funds of the Just Transition Fund at 868 million.
Less Russia and more coal and renewables
Thanks largely precisely to the application of emergency measures and the deployment of renewable energy and efficiency as a consequence of the change in the energy model that the EU was forced to accelerate as a result of the Russian aggression against Ukraine, one of the main conclusions of the last energy year is that the EU is meeting its climate objectives. In 2022, their joint CO2 emissions decreased by 3%, achieving a reduction of 32.5% compared to 1990 levels. Furthermore, it was evident that the fight against climate change not only does not slow down economic growth, but is compatible with it.. EU GDP growth rose by 3.5% last year, even more than emissions cuts.
“The EU is fulfilling. Despite the difficulties of the energy crisis, we have improved compared to the previous year and pre-pandemic levels,” said the vice president and head of Climate of the community executive, Maros Sefcovic.
Despite the fact that, as the report also points out, the energy crisis caused the EU to burn more coal again to guarantee energy supply, in a year in which the Twenty-seven broke almost all of its ties with its largest energy supplier, Russia.. According to the report, the EU cut its imports of Russian oil by 90%, going from importing 155 bcm of gas in 2021 to just 80 bcm, with another cut in 2023 to just between 40 and 45.
Last year, the EU reduced its gas consumption by 18% and was able to set up a joint purchasing platform to achieve better prices that will soon hold the fourth round and which is expected to be successfully replicated to hydrogen purchases. renewable, with a first test auction in November. 2022 was also a “record year” in the deployment of renewables, with the installation of 60% more installed photovoltaic power than in 2021 (41 gigawatts more) and onshore and offshore wind, with 45% more than the year former. Brussels warns that there is still much to do in sectors such as transport or agriculture.
As for coal, Sefcovic has acknowledged that more use was made of this raw material with high CO2 emissions “to replace electricity production”, reduced from nuclear energy – largely due to breakdowns in the French park – and hydroelectric power, for example. widespread drought. “But it is a short-term effect,” said the vice president of the Commission.