This system, adopted by the European Ministers of Energy, aims to block transactions on the wholesale gas markets beyond a certain threshold, and thus prevent any surge in prices which would ultimately affect companies and consumers. .
The objective is not to structurally reduce prices but “rather to function like the airbag of a car, to protect us in the event of an accident”, that is to say an exceptional surge in prices, insisted Belgian Minister Tinne Van der Straeten. Combined with strict conditions, this system is “realistic and effective”, estimated for his part the Czech Minister Jozef Sikela, whose country holds the rotating presidency of the EU.
The mechanism will come into effect on February 15, for at least one year. In practice, it will be triggered automatically as soon as the price of the monthly contract (for delivery the following month) reaches 180 euros/megawatt-hour for three consecutive days on the TTF reference market, which serves as a reference for a large part of the transactions. of gas in Europe.
But on the strict condition that it is also at least 35 euros higher than the average international price of liquefied natural gas (LNG), in order to prevent LNG suppliers from abandoning Europe in favor of Asian customers paying for their gas at more attractive prices.
The monthly contract was trading there on Monday around 110 euros/MWh, following having briefly soared to around 300 euros in August.
“Not a quick fix”
Once the mechanism has been initiated, transactions on futures contracts on the TTF, but also on other trading platforms, will be capped for 20 days – but not over-the-counter trading (outside regulated markets).
These contracts might then no longer be traded beyond a “dynamic ceiling”, corresponding to the international reference price of LNG (calculated on a basket of world prices) plus 35 euros – a variable ceiling, making it possible to ensure that Europe remains an attractive market for suppliers in relation to the prices offered in Asia.
The mechanism will be automatically deactivated when the price of the monthly TTF contract drops below 180 euros, or if the EU declares a state of emergency for EU supply. And the mechanism as a whole may be suspended by the Commission in the event of “risks to gas supply, financial stability or gas flows within the EU”.
The agreement “provides safeguards to preserve our security of gas supply and the financial stability of market players”, underlined the French Minister for Energy Transition Agnès Pannier-Runacher.
“Given the safeguards, it is difficult to say the real impact. This is not a miracle solution: Europeans should focus on the real solutions: reduction of their demand and green transition”, observed Simone Tagliapietra, expert of the Bruegel Institute.
As Europeans strive to break away from Russian gas, Moscow immediately condemned an “unacceptable” decision.
Group gas purchases
The Commission had initially proposed to cap certain gas contracts once they exceeded 275 euros/MWh for two consecutive weeks, among other conditions – factors never met, even at the height of the surge last August.
Several States (Spain, Poland, Greece, Italy, etc.) had called for the relaxation of the conditions for activation. On the contrary, reluctant to intervene, other states (Germany, the Netherlands, etc.) demanded drastic “safeguards” to avoid threatening supplies.
While the Twenty-Seven, anxious to display a united front, sought unanimity, Berlin finally approved the compromise: “We have enough instruments to use this mechanism in an intelligent and targeted way”, judged the minister German Robert Habeck.
Two other emergency texts
The agreement found makes it possible to ratify two other emergency texts, which were already the subject of an agreement between the States but whose formal adoption remained dependent on a decision on the capping of the price of gas.
The first provides for group purchases of gas, in which consortia of companies would participate, in order to obtain better prices together, and a solidarity mechanism automatically ensuring the energy supply of countries threatened with shortages. The second simplifies the authorization procedures for renewable energy infrastructures (solar and heat pumps) for one year.
A structural reform of the European electricity market, which aims to decouple it from gas prices, will also be proposed in early 2023 by the Commission.