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EU energy ministers seek emergency solutions to energy crisis

Water vapor rises from the cooling tower of the Isar 2 nuclear power plant. Photo: Armin Weigel/dpa

Water vapor rises from the cooling tower of the nuclear power plant (AKW) Isar 2nd photo

© Armin Weigel/dpa

Europe is eagerly looking forward to a meeting of EU energy ministers in Brussels. There are no easy solutions to high energy prices – but one option is particularly popular.

Price caps, the skimming of profits and the obligation to save electricity – these are the buzzwords that the energy ministers of the EU countries have to deal with in the current emergency. This Friday, Federal Economy Minister Robert Habeck (Greens) and his colleagues will discuss five proposals from the European Commission on how consumers and businesses can be relieved of high energy costs against the background of the war in Ukraine.

The German-backed proposal to limit the excessive profits of electricity producers and distribute the money among consumers will also be discussed. According to diplomats, the measure has received approval in several EU countries – also because some have already introduced their own version of an excess profit tax. But, as always, much remains to be clarified at European level, especially on a sensitive subject such as energy.

Electricity from gas-fired power plants drives up prices and profits:

Since the price of gas has risen sharply against the background of the war in Ukraine, electricity has also become more expensive. The price of electricity is determined by the most expensive switched-on power station required for production. When demand is low, cheap electricity from wind energy, for example, is sufficient. Currently, however, expensive gas-fired plants have to be used to meet demand – and the price depends on it. Other energy producers that generate electricity more cheaply – for example from wind, solar or nuclear energy – make big profits because they can also sell their electricity at the higher price.

Distribute Excessive Profits to Consumers:

Some of these “accidental gains” could now be skimmed off and used to relieve consumers. The European Commission has proposed capping the revenues of companies that produce electricity from cheaper sources than gas – such as wind, solar, nuclear or coal. Anything beyond this maximum price has to be skimmed off by the state and redistributed to consumers – akin to excessive profit tax. The proposals are similar to the plans of the federal government.

According to a first draft European law, which is available to the German news agency, the income limit could be set at 200 euros per megawatt hour. That would be about half the current electricity price on the German wholesale market, which was recently around 440 euros per megawatt hour.

Solidarity levy for oil and gas companies:

In addition, Commission President Ursula von der Leyen also wants oil and gas companies with excessive profits on the balance sheet. These may be required to pay a solidarity contribution. “All energy sources must contribute to overcoming this crisis,” says von der Leyen, without giving details.

Save electricity:

As a further measure, von der Leyen proposes a binding target to reduce electricity consumption during peak hours. During these times, electricity is particularly expensive because the expensive gas is used for production in the market during peak demand. According to the concept, the binding target could be set at five percent. According to diplomats, there is a lot of encouragement for energy-saving measures.

Save energy suppliers from bankruptcy:

Large price jumps and uncertainty in the markets can lead to payment problems for energy companies, some of which do business well in advance. The European Commission therefore wants to support energy suppliers and adapt the EU state aid rules so that state aid can be granted quickly in the event of an emergency. This is also a measure that encounters few objections, diplomats say.

Price ceiling for Russian gas:

In order to reduce Russian revenues, the European Commission is proposing to buy Russian gas only if it does not exceed a certain price. However, diplomatic sources said many countries were concerned. Russian President Vladimir Putin has threatened to cut gas supplies to the EU in the event of a gas price cap. Countries like Hungary are still heavily dependent on Russian supplies. Overall, according to EU figures, Russian gas still accounts for 9 percent of EU gas imports, compared to 40 percent at the start of the war.

How it goes on:

If the ministers can agree on a common course, the European Commission wants to come up with concrete legislative proposals on Tuesday. The EU countries would then have to agree to this. If the countries do not agree, a European patchwork of measures could arise. The federal government has already announced that it will introduce a revenue cap for electricity companies itself if it does not move quickly enough at EU level. Until when exactly is open.


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