Climate and Energy Minister Rob Jetten will discuss Europe’s energy cap with his EU colleagues. René Peters, energy expert at TNO, says the ceiling “really means nothing.” “The gas is then purchased at 275 euros per megawatt hour, which is equivalent to 2.75 euros per cubic metre.”
Peters notes that this price is significantly higher than the Dutch maximum price, which will hopefully come into effect on January 1st. “This is almost double the 1.45 euro, which will be the maximum price for the consumer.” This is immediately an important difference with the EU mechanism. For the Netherlands, the price ceiling between the energy supplier and the consumer applies, but for the EU, the price ceiling between the energy producer and the supplier applies.
Furthermore, the EU’s “cap” only comes into effect at a certain time, Peters explains. ‘Only when the price of LNG in the world is 58 euros lower than the price of gas in Europe will the cap come into effect. This is to ensure that LNG still reaches Europe.’ In addition, the gas price must exceed 275 euros for at least two weeks.
“As a result, the ceiling is actually not very solid,” concludes the energy expert. ‘Firstly, it is very high and secondly, if LNG has yet to arrive in Europe, then the price cap can be turned off. It is therefore not a very effective means of lowering the price of gas.’
Extreme situations
Looking ahead, the European mechanism seems to be activated only in very extreme situations, Peters points out. ‘At the moment the price of gas is not even half of that ceiling, we are at 120 euros per megawatt hour. The price of gas has fallen significantly in recent months due to full storage and winter that has not yet started. (…). In recent months, the price of gas has only been above 275 euros for a few weeks, so the ceiling is very high».
The Netherlands has already announced that it sees nothing in Brussels’ proposal for a cap, albeit a slight one. The Hague fears that the gas supply could be compromised. For example, suppliers may ignore Europe and gas traders may run into payment problems. In that case, the European Commission could still intervene with the current proposal. “It may decide to disable the mechanism if there is a threat of gas shortage.”
Source: BNR
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