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Europe.Table #129 / 21. February 2022

Gas storage subsidies + Bernd Lange on supply chain law + Munich Security Conference

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Decision Brief
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To the German edition.
  • Energy crisis: Commission wants to allow subsidies for gas storage facilities
  • Bernd Lange: ‘Ursula von der Leyen bit off more than she could chew’
  • Electricity market: EU states could skim off additional revenues
  • Delays expected in Fit for 55 package
  • Michel holds out prospect of more support for Ukraine
  • EU accuses China of patent license extortion
  • Profile: Sascha Müller-Kraenner
Dear reader,

Over the weekend, the ongoing Russia-Ukraine conflict was the dominant topic at this year’s Munich Security Conference, held without Russia for the first time in decades. Europe’s leaders appeared emphatically united at the diplomatic meeting and assured Ukraine of further support. EU Council President Charles Michel announced a donor conference for the country on Sunday and warned Russia once again of “massive sanctions” in the event of an attack.

On the television program “Anne Will” on Sunday evening, Commission President Ursula von der Leyen specified that Russia would be “practically cut off from the international financial markets” in the event of military intervention. She also said sanctions against Russia’s energy industry, which is heavily dependent on fossil fuel exports, are a powerful lever that gives diplomacy a very strong weight. More on this in the News.

Despite Western warnings, Moscow remains on a confrontational course in the conflict over Ukraine. The Belarusian Defense Ministry announced on Sunday that a military maneuver with Russian troops would be extended. Initially, the large-scale maneuver was to end on Sunday.

The European Commission wants to respond to persistently high gas prices by obliging member states to ensure that gas storage facilities are filled to a minimum level in the fall of each year. To compensate for the lack of economic incentives for energy companies, the Commission is relying on national financial support, for example, in the form of contracts for differences for storage operators.

EU states are to coordinate with each other on storage, and the possibility of joint procurement of strategic reserves is also to be advanced. This was announced by the Brussels authority in a communication to be officially published at the beginning of March. Manuel Berkel evaluated the document in advance. The draft also includes “measures to recycle high rents“, which means profits made by energy companies from high electricity prices. Therefore, the money collected could be returned to households and companies, as you can read in the News.

Bernd Lange is Chair of the European Parliament’s Committee on International Trade. The fact that the Commission’s supply chain legislation expected for Wednesday does not include an import ban on products from forced labor is difficult for the SPD MEP to accept. After all, a ban along these lines was already announced a long while back. The politician now expects independent legislation for such an import ban, as he explains in an interview with Amelie Richter, also shedding light on possible effects on the EU’s trade with China.

Have a great start to the week,

Your
Timo Landenberger
Image of Timo Landenberger

Feature

Gas storage facilities: Commission wants to allow subsidies

In the fight against high gas prices, the EU Commission is backing a subsidy and demand strategy. Member states and operators are to be obliged to achieve a minimum gas storage level by September 30 of each year. However, in the draft communication on energy prices, the authority also points the way to financial incentives. States are also to double biogas production by 2030.
By
Manuel Berkel
Image of Manuel Berkel

In the gas crisis, the EU Commission does not raise hope that the situation will ease soon. “Gas and electricity prices will remain high and volatile until at least 2023,” the authority writes in a draft communication on energy prices obtained by Europe.Table. Commission Vice President Frans Timmermans plans to present the final version of the 30-page paper on March 2. The draft suggests that additional financial resources from state budgets or consumers may be needed for greater security of supply.

With prices remaining high, the paper said the market will continue to provide insufficient incentives to buy gas for storage. This was common practice for decades for trading in the summer when demand was low. Therefore, the Commission urges member states to set minimum fill levels for storage operators so that reservoirs are sufficiently full at the start of the heating season. At the same time, however, the paper also points to possible subsidies or regulatory relief. For example, the storage facilities could be fully exempted from the network fees that are passed on to gas customers.

Aid without tenders

The Commission mentions contracts for differences for traders who book and use storage capacities as new possible subsidies. The state would bear the traders’ additional costs compared with a fixed strike price. If the gas price falls below this value, the difference would flow to the state. In return for aid, recipients would be able to be obliged to store gas in stages during winter.

  • Agricultural policy
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  • Energy prices
  • Hydrogen
  • Natural gas
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