Gas price cap in Spain + Bitkom survey o • Table.Briefings

Dear reader,

It had long been suspected, but now the European Union has found evidence that some EU officials’ smartphones, including EU Justice Commissioner Didier Reynders, have been compromised by the spy software Pegasus. However, it is still unclear who is behind this spying operation and whether it is possibly an EU country, the Reuters news agency reported yesterday, citing a letter from the EU.

What – if any – is the benefit of a gas price cap for electricity generation, as currently implemented by Spain? An initial assessment has revealed a sobering result. Isabel Cuesta Camacho analyzed why the impact on consumer prices is low despite the cap.

German businesses are often more ambitious in implementing climate targets than German politicians, according to a recent representative survey conducted by the digital association Bitkom. Digitization, especially cloud computing, plays a major role in this. Corinna Visser took a look at the study.

The European Court of Auditors believes that the EU’s energy independence plan, also called REPowerEU, is not sufficient to properly reach target. These doubts are caused by the uncertain financing of the project. Read more about this in the News.

Today’s profile is about someone with a sharp eye on the energy market: As Managing Director of the EFET Germany association, Barbara Lempp represents the interests of 150 energy traders in Germany. She does not see a price cap for electricity prices as the right way to go in this crisis.

I wish you an exciting read.

Your
Lisa-Martina Klein

Gas price cap in Spain: only moderate relief for consumers

By

Isabel Cuesta Camacho

Since June 15, Spain and Portugal have been applying the measure to cap the gas price for power generation. However, the initial assessment after one month is meager. In Spain, the exchange price for electricity is particularly important politically because 37 percent of households have a regulated electricity tariff whose price is directly linked to the spot market. The exchange price for electricity, in turn, is determined by the gas price: According to the rules of the European electricity market, the most expensive power plant determines the electricity price for all types of generation – and in view of skyrocketing gas prices, this is usually a gas-fired power plant.

On the electricity exchange, the Iberian gas price cap certainly had a dampening effect. In the first two weeks after the measures were introduced, the wholesale price of electricity was €145 per megawatt hour, 47 percent below the price that would have been paid without the price cap, according to a statement from the Spanish Ministry for Ecological Transition.

Electricity tariff for end customers decreases only slightly

For end users, however, the savings in the regulated tariff was only 14 percent. “We would have liked a lower price, but there are elements in pricing that do not depend on the government, but on the markets,” said the Minister for Ecological Transition, Teresa Ribera.

In an interview with Spanish radio station Onda Cero, she acknowledged that it was “obvious” that the price of electricity was “higher than we would like”. For this reason, Ribera said, the government had “adopted additional measures such as reducing the VAT on electricity by five percent and extending the heat social bonus”.

The EU Commission had approved the gas price cap at the beginning of June – primarily because the Iberian Peninsula has little pipeline capacity for electricity trading with the rest of Europe and only ten percent of the gas consumed there comes from Russia. Nevertheless, Portugal and Spain are subject to the European price-fixing mechanism.

Four times as higher exchange price for gas in the rest of the EU

By the end of May 2023, the two states may cap the price of gas used to generate electricity at an average of €48.80 per megawatt hour – a fraction of the cost in the rest of Europe, where the price of gas rose to more than €200 this week.

Spain and Portugal are allowed to reimburse the difference between the wholesale price for gas and the price cap to power plant operators as aid. At the time of approval from Brussels, an initial €8.4 billion was earmarked for this.

However, the government finances the compensation payments to the power plant operators in part through a levy on electricity customers. As a result, gas prices and electricity tariffs are not completely decoupled and the relief is less than for the exchange price.

After all, the subsidies ensure that the price on the Spanish power exchange is still lower than in the rest of the EU. Yesterday, the day-ahead price in Spain was below €180 during the day, but in Germany, the spot price reached between €400 and €600 for hours.

Since the beginning of July, however, the electricity price has also risen further in Spain. Generation from low-cost renewables has slumped – due to the drought, especially for hydropower. Electricity generation from solar energy has been affected by heat, but above all by the Calima weather phenomenon, in which sand from the Sahara prevents solar radiation.

Because of the high temperatures, the demand for gas for power generation, of all things, increased in parallel. Air conditioners and fans are running at full speed. According to Enagas, which manages the country’s gas grid, demand for natural gas for power generation reached more than 800 gigawatt hours on July 13, surpassing the previous record of 770 gigawatt hours set on June 16.

Further special tax planned

Instead, the Spanish government is trying other measures to ease the burden on consumers’ wallets amid rising inflation. During the State of the Nation debate in mid-July, President Pedro Sánchez unveiled a series of measures aimed at preventing the economic crisis from coming at the expense of the most disadvantaged. In addition to the previously announced special tax on energy companies, the government will temporarily impose another special tax on major banks to raise €7 billion over two years.

Unais Sordo, general secretary of Comisiones Obreras (CCOO), one of Spain’s largest unions, told Europe.Table, “Any improvement in corporate surpluses that results from measures such as raising interest rates must be passed on to the people instead of to shareholders.”

Bitkom: Digitization helps with climate protection

By

Corinna Visser

The digital association Bitkom called on German policymakers to ensure a level playing field for data centers in the EU. “We would like to see a level playing field within the EU so that companies do not outsource their new data centers to neighboring countries for cost reasons,” Bitkom CEO Bernhard Rohleder said on Wednesday when presenting a representative survey of 500 German companies on the topic of digitization and climate protection. Rohleder pointed out that the price of electricity still accounts for around 50 percent of the total expenditure on a data center.

The background to this is that the coalition agreement stipulates that all new data centers in Germany must be operated in a climate-neutral manner from 2027. The European Digital Strategy, on the other hand, has set itself the goal of achieving climate-neutral operation by 2030 at the latest. To this end, there is also a voluntary commitment by companies, the Climate Neutral Data Centre Pact.

Bitkom: Climate targets can only be achieved with digitization

Overall, the survey showed that German businesses are often more ambitious in their climate targets than German politicians. Almost half of the companies (45 percent) stated that they want to be climate-neutral as early as 2030 – and another 37 percent by 2040. Digitization will play a major role in this: Every company that is pursuing (52 percent) or planning (37 percent) a specific sustainability strategy is integrating digital technologies into it. For a quarter (24 percent), digital technologies are even crucial for the implementation of sustainability goals.

Bitkom believes that no company can achieve its sustainability goals without digitization. Without a drastic increase in energy efficiency with the help of digital technologies, Germany will not succeed in massively reducing its consumption of oil, gas and coal and thus its CO2 emissions, said Rohleder. The vast majority of the companies surveyed support the German government’s goal of achieving climate neutrality by 2045. Only eight percent of the companies are unable or unwilling to do so. One in a hundred companies already considers itself climate-neutral.

Visible sustainability effects through digitization

In order to support small and medium-sized enterprises in particular on their way to climate neutrality, Rohleder called for appropriate advisory modules in the SME advisory service funded by the German government. The advisory services should provide companies with practical guidance on how they can use digitization to decarbonize their business. “In our view, there is enough experience and academic knowledge here, but not enough advisory services for practical implementation.” In addition, more than half (58 percent) call for the government to lead by example and pay attention to sustainability in the procurement of IT services and digital devices in the public sector.

The positive climate effects of digitization are already evident in the majority of companies: 77 percent of those surveyed have seen an overall reduction in CO2 emissions through the use of digital technologies and applications. According to the majority of companies (71 percent), cloud computing has contributed to this. Running servers, storage and applications in a large data center is generally more efficient than running this infrastructure on-site at each individual company. Half (52 percent) also see potential for greater climate protection in the Internet of Things (IoT), as the networking of devices and machines helps to increase energy efficiency.

Data centers – energy-intensive but strategically important

But digitization requires the appropriate infrastructure. “Data centers are the foundation of digitization,” Sophie Kamrad, sustainable digital infrastructures officer at Bitkom, told Europe.Table. At the same time, data centers also have a major leverage effect due to their high energy requirements. Germany is competing with other European locations in this regard, she said. “The Nordic countries, in particular, have competitive advantages here – because of their high share of renewable energies and also because of the climatic conditions,” Kamrad explained.

Data centers not only require a lot of energy, they also generate a lot of waste heat, which is still underutilized. On the other hand, Germany’s proximity to one of the world’s largest Internet nodes, DE-CIX in Frankfurt am Main, as well as German regulations on data protection and legal security, are arguments in favor of Germany as a location for data centers. “On the other hand, the biggest disadvantage that German data centers have, is the highest electricity prices in the EU,” Kamrad said. “Prices clearly need to come down to strengthen competitiveness.” That’s because it’s strategically important for new data centers to be built in Germany as well. “Without the appropriate data centers, you block your access to future development scenarios and innovations,” Kamrad said.

REPowerEU: Court of Auditors sees problems with funding

Europe’s Energy Independence Plan (REPowerEU) may not be sufficient to achieve the plan’s goals, according to the European Court of Auditors. This was revealed in an opinion issued by the auditors on Tuesday. The main problem is funding to advance energy diversification, environmental transformation and gas independence from Russia. This is because the majority of the sources of funding for REPowerEU are not under the control of the Commission.

According to Commission estimates, the program will require an additional investment of €210 billion. This is to be raised through additional sales of CO2 allowances from the Market Stability Reserve (MSR), voluntary grants from cohesion funds and rural development funds, and remaining loans from the Recovery and Resilience Facility.

The latter is part of the EU crisis plan to mitigate the economic and social impact of the COVID-19 pandemic. And because implementation of the Recovery and Resilience Facility measures rests with member countries, auditors say there is a risk “that projects of strategic importance to the EU as a whole will not be financed through REPowerEU”.

Actual amount could be lower

Further uncertainties arise from the voluntary nature of the grants from the funds. Therefore, the amount actually available could be significantly lower, the auditors write in their statement.

A third, but already known, problem arises from the €20 billion to come from MSR allowances. This could undermine the reserve’s original purpose of stabilizing the CO2 price and undermine the ETS, they say. After all, the auditors write, this source of money is the only one in the hands of the Commission.

The auditors are also critical of the planned allocation of REPowerEU funds, as they are to be allocated in line with the shares earmarked for the reconstruction and resilience facility. However, they argue that this does not reflect the current challenges and objectives of REPowerEU or the specific needs of the EU countries.

Shortly after the publication of the Commission’s plans, climate policy researchers and analysts had already expressed concerns about the financing of REPowerEU (Europe.Table reported). In particular, they had warned against using allowances from the MSR to raise money, as it would lead to uncertainties in the ETS.

The Commission thus faces a number of problems with its proposal for Europe’s energy independence. For in principle, the idea of such a plan enjoys broad support, both in Parliament and among the member states and many experts. But the financing models have so far met with rejection in many places. luk

Russia turns gas tap off further – German government sees power play

As announced, Russia has again cut gas deliveries via the most important pipeline Nord Stream 1, citing technical reasons. The deliveries have been halved compared to the previous days, and the utilization of the pipelines is at 19.5 percent of the actual capacity, the Federal Network Agency announced on Wednesday.

The German government called stated technical reasons due to the maintenance of a Siemens turbine pretextual. Deputy government spokeswoman Christiane Hoffmann spoke of a “power play” by Russia. “The turbine is there, it has been serviced.” Nothing stands in the way of transporting it to Russia, she said. “It’s not up to the German side.”

The network agency said the supply situation was tight and further deterioration could not be ruled out. “Companies and private consumers must prepare for significantly rising gas prices.”

The cuts make it harder for Germany to fill its gas storage facilities for the winter as planned. They are currently around 67 percent full, but are expected to be 95 percent full by November. Germany will have to buy the missing volumes at short notice and at high cost on the tight market. The German government is therefore desperately seeking alternatives to Russian gas.

France signaled help for the cold months: According to government representatives, gas in the amount of about 20 terawatt hours could flow to Germany. This would be about two percent of Germany’s annual consumption. “130 gigawatt hours per day would be possible. In winter, that would add up to a total of 20 terawatt hours,” said a French government representative. That would be equivalent to about five percent of France’s annual consumption.

The Federal Network Agency urges savings with immediate effect and sees first successes: Private households, as well as industry, are consuming “five, six, seven percent less,” agency head Klaus Müller told Deutschlandfunk radio. “Germany must consume less gas.” Now, something has to be done in all areas of society, be it technical innovation, be it diversifying energy sources.

“But the bottom line is saving gas. And that’s where I’d like to hear less complaining, so to speak, and more reports where someone says we as an industry, we as a city, we as a region are helping to save gas.” At the same time, consumers need to prepare for higher energy prices, Mueller said. “It’s a price trend on notice.” rtr

G7 aim to have price cap on Russian oil in place before December

The Group of Seven richest economies aim to have a price-capping mechanism on Russian oil exports in place by December 5, when European Union sanctions banning seaborne imports of Russian crude come into force, a senior G7 official said on Wednesday.

“The goal here is to align with the timing that the EU has already put in place. We want to make sure that the price cap mechanism goes into effect at the same time,” said the official, who asked not to be named.

The G7 – the United States, Canada, Japan, Germany, France, Italy, and Britain – said last month they would consider setting a price cap on Russian crude to curb the oil revenue that Moscow uses to finance its invasion of Ukraine.

Since then there have been efforts to bring on board China and India, which are already buying Russian oil at a discount to the market price. “We’ve already heard from a number of Asian countries that are interested in either joining the coalition or better understanding the price point at which the price will be set in order to strengthen their hand in their negotiations with the Russians over future contracts,” the G7 official said.

The price set by the G7 would be made public for that reason, he said. China and India are interested in the idea of minimizing their oil import costs because they are concerned about the budget impact through often-subsidized retail prices and inflation, the official said.

The G7 want the price on Russian crude to be set by members of the buyers’ cartel at a level above Russian production costs, so as to provide an incentive for the Kremlin to keep pumping, but much below the current high market prices.

This way, Russia would face a tough choice between agreeing to lower, but continued revenue and almost no revenue once the EU crude oil embargo enters into force in December.

The official said Russia will have a hard time selling its crude elsewhere because the EU sanctions envisage a ban on all financial services connected to trade in its oil, including insurance, re-insurance and financing of cargos and ships. rtr

Istanbul controls Ukrainian grain exports

The control center agreed by Russia and Ukraine to monitor Ukrainian grain exports has been officially opened in Istanbul. Turkey believes that the center will make a significant contribution to overcoming the food crisis, Turkish Defense Minister Hulusi Akar said at the opening ceremony in Istanbul on Wednesday.

Preparations were currently underway for the first ship loaded with grain to leave Ukraine via the Black Sea. Ships are to be inspected as they pass through the Bosphorus Strait, i.e., as they enter and exit the Black Sea, to ensure that they are not carrying weapons or the like. The coordination center will register the merchant ships and track their movements via satellites, among other means, Akar said.

The center is part of an agreement reached Friday in Istanbul, mediated by the United Nations and Turkey, which lifted the blockade of Ukrainian ports. The center has been in operation since Saturday, according to Akar. Akar saw the fact that Ukraine, Russia and the UN sent representatives just one day after the signing as a sign of determination to implement the agreement. The center is staffed by civilians and military personnel – five representatives from each party, Akar said.

In Friday’s agreement, Russia had pledged to allow ships to sail through a sea corridor and not to attack them or any ports involved. Before the Russian war of aggression, Ukraine was among the world’s most important grain exporters. However, because of the war, more than 20 million tons of grain could not be exported from Ukraine so far. dpa

Macron receives Saudi crown prince in Paris

France’s head of state Emmanuel Macron will receive Saudi Crown Prince Mohammed bin Salman on Thursday evening. They plan to sit down for a working dinner at the Élysée Palace in Paris. What topics they want to discuss, the French presidential palace initially did not announce. According to the Saudi royal court, the topics to be discussed will be bilateral relations and issues of common interest.

The crown prince is currently on his first trip to the European Union since the murder of journalist Jamal Khashoggi almost four years ago. Khashoggi, who wrote a column for the “Washington Post”, had been brutally killed by a hit squad in the Saudi consulate in Istanbul in the fall of 2018. US intelligence agencies see the crown prince as directly responsible. The latter denied having ordered the killing.

On Tuesday, the crown prince had already traveled to Athens, Greece, where he met with Greek Prime Minister Kyriakos Mitsotakis. There they sealed an agreement to lay an undersea data cable linking Europe with Asia and talked about the possibility of connecting their power grids to supply Europe with cheap green energy.

Greece and Saudi Arabia had already agreed in May on the main terms of a planned joint venture to build a data cable called the East to Med data Corridor. It is to be developed by Mena Hub, owned by Saudi Arabia’s STC and Greek telecommunications and satellite applications company TTSA.

“By connecting the power grid … we can supply Greece and southwestern Europe with much cheaper renewable energy through Greece,” Prince Mohammed said. Bilateral agreements were also signed in the fields of energy and military cooperation. rtr/dpa

Constitutional court deals with EU’s COVID Recovery Fund

On the second day of hearings on the EU’s COVID Recovery Fund, the Federal Constitutional Court in Karlsruhe dealt intensively with the control of the fund. Clemens Ladenburger of the EU Commission’s Legal Service was asked about this. Federal Constitutional Court Judge Peter Müller wanted to know how it could be controlled that no further EU loans are taken out to intervene in other economic emergencies.

Constitutional judge Christine Langenfeld asked how a marshaling yard could be prevented. She feared that EU member states would not be able to finance necessary investments from their budgets but would be able to fall back on the fund for this purpose.

Ladenburger stressed in his hour-and-a-half questioning that borrowing is allowed under the EU treaties only in economic emergencies. Otherwise, the EU treaties would have to be amended. Ladenburger believes that control is ensured by the fact that disbursements are only made after a precise investment program has been presented. The progress of reforms would be monitored, and money would be demanded back in the event of backsliding. The money would not be used to balance the national budget but only for investments.

Already on Tuesday, the first day of the hearing, it became clear that the constitutional judges in Karlsruhe did not see the EU borrowing alone as an obvious overstepping of competencies. In principle, the EU treaties allow earmarked financial aid in economic emergencies.

At stake is a total of €750 billion that the Commission is borrowing to finance the management of the COVID crisis. The member states are to receive money partly as a grant and partly as repayable loans. These are to be invested in climate protection, digitization and reforms. This is the first time the EU has taken out loans for which member states are liable in the event of default. The Bundestag approved the program in March 2021 by a two-thirds majority. More than 2,000 citizens lodged a constitutional complaint against this. The ruling of the Second Senate is expected in a few months. rtr

Kremlin threatens Western media with pressure after RT ban

Russia has threatened pressure against Western media after its state TV channel RT was banned from broadcasting in France. Moscow’s reaction to the EU’s ban on RT France, upheld by the European Court, will be “extremely negative”, Kremlin spokesman Dmitry Peskov said Wednesday. “The attack on freedom of speech and the media in European countries, including France, causes our concern and regret,” Peskov said.

The Kremlin spokesman did not address the large number of banned media in Russia. “Of course, we will take similar measures of pressure on Western mass media that operate in our country,” Peskov said. “We will also not let them work in our country. Russia will be taking no soft stance in return.” He also did not mention that Russian correspondents can work freely in the EU. In contrast, Western correspondents are allowed to work in Russia only with accreditation from the Foreign Ministry.

Earlier, judges in Luxembourg had rejected a challenge by RT France to an EU broadcasting ban over allegations of war propaganda (Case T-125/22). The sanction had been issued in early March, shortly after the start of Russia’s war against Ukraine. It affects all distribution channels of RT and Sputnik in the EU, such as cable, satellite, or Internet. RT offshoots such as RT in German or French are also affected. In the meantime, the EU has canceled the broadcasting frequencies of three other stations.

The offshoot RT DE is also not allowed to broadcast in Germany. For this reason, Russia had withdrawn the broadcasting license of Deutsche Welle, the foreign broadcaster of the Federal Republic of Germany, and had the correspondent’s office in Moscow closed. Peskov expressed the hope that “loopholes” would be found “so that the transmission of our information via various channels, which is much-needed, can start again.” dpa

Barbara Lempp – a candid look at the energy market

Barbara Lempp is Managing Director of EFET Germany, the association of energy traders.

Barbara Lempp, a lawyer by training, came to energy policy through Herbert Reul. In 2003, she applied to the current CDU Minister of the Interior for North Rhine-Westphalia to work as an advisor in the European Parliament. Reul asked her in the job interview which policy field he should be interested in if elected. She suggested energy policy to him.

Reul was elected, Lempp got the job, and later rose to office manager. “Then I realized that you can spend a lifetime working with energy.” She then worked for RWE for more than six years. Today, Lempp is head of Germany for the European Federation of Energy Traders (EFET), an association of 150 energy traders. Lempp campaigns for their interests in Berlin.

Saving energy has never been more important

In the nine years Lempp has worked at EFET, the price of electricity has never been this high. That’s also a problem for power sellers, she explains. Electricity sellers make a good deal, but power companies also have to buy electricity. That becomes a problem. “Cash has to be put behind every deal as collateral, and that ties up capital.”

Nevertheless, she and her association are campaigning against price caps, such as those being called for by Yasmin Fahimi, chairwoman of the German Federation of Trade Unions, and parts of the opposition. This would stop companies from investing. Lempp calls for a state cushioning as well as a fundamental promise to finally implement. “We have to save more energy,” Lempp says. “We’ve all agreed on that since the energy transition, but now it becomes critically important.”

Lempp wants to discuss the emerging energy gap without ideology, meaning Germany should use its coal reserves, CO2 should be captured and stored, and there will be no way around extending the operating lives of the three remaining nuclear power plants if Russia turns off the gas tap. “The next two winters are critical,” Lempp says.

Small fixes, fast alignment

Defending market principles is not easy at the moment, Lempp says. Lobbying is difficult because the decision-makers in politics are nervous and want to cushion prices at all costs. Her association has an advantage here: Internally, the votes among the member companies take place very quickly and everyone suffers from the same problems.

The Berlin team consists of only three people, including Lempp. But that works well because the member companies are also involved and write position papers that can then be quickly voted on. EFET provides politicians with a candid look at the energy market. At the large German Association of Energy and Water Industries (BDEW), for example, the network operators also sit at the table, and the positions are then less clear. “I don’t have to bend over backwards,” says Lempp. Tom Schmidtgen

EUROPE.TABLE EDITORS

Till
Hoppe

Charlotte
Wirth

Falk
Steiner

Timo
Landenberger

Corinna
Visser

Lukas
Knigge

Eric
Bonse

Sarah
Schaefer

Manuel
Berkel

Lisa-Martina
Klein

Markus
Grabitz

Stephan
Israel

Claire
Stam