Commodities

EU warns against gas price cap on electricity


© Stocksak. FILEPHOTO: Model of natural-gas pipeline and EU flag, July 18, 20,22. REUTERS/Dado Ruvic/Illustration/File Photo

By Kate Abnett

BRUSSELS (Stocksak), – According a Stocksak document, the European Commission has warned countries about a EU-wide limit on the price of gas needed to produce electricity. This could lead to increased gas use and increased exports.

The energy ministers of the European Union met Tuesday to discuss options for limiting EU gas prices. However, there are still differences between countries after weeks of discussions.

The document shows the Commission shared with countries an assessment of a price cap on gas used for power. This scheme was launched by Spain and Portugal this summer following Russia’s invasion in Ukraine and subsequent cuts in EU gas supplies.

The document stated that EU-wide rollout of this idea – a France-inspired idea – could result in an increase in gas demand by up to 9 Billion cubic metres.

The document stated that it would also require measures to stop cheaper electricity flowing to non-EU nations like Britain and Switzerland, which do not have the price caps.

Germany and the Netherlands warned that price caps to lower gas prices could lead to a spike in consumption. This comes at a time when many countries are trying to cut fuel costs and replace Russian supplies. Russia supplied the EU with 155 billion cubic meters of gas before the invasion.

The Commission stated that, if market prices for gas were 180 euro per megawatt-hour for a year it could provide a net benefit of 13.4 billion euros ($12.8 billion) and help to reduce inflation. However, these benefits would not be evenly distributed. In recent days, gas prices have fallen to a much lower level due to mild weather conditions and overflowing storage tanks.

The document stated that France, a net importer and exporter of gas-fuelled electric power, would be the largest beneficiary of the power sector gas price caps.

It would be the most expensive to fund the scheme for Germany, Italy, and the Netherlands, which produce large amounts of gas-fueled power, according to the document. However, it did not specify how the EU-wide mechanism would work.

($1 = 1.0131 euros)

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