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Energy

Actions and measures on energy prices

EU response to the surge in energy prices and implementation of the REPowerEU plan.

In the EU, each country determines its energy mix, in compliance with internal market rules and taking into consideration our climate ambition. The primary objective of a well-functioning market is to foster a secure supply of energy, produced as sustainably as possible and at affordable prices.

In the second half of 2021, the EU saw a significant increase in wholesale gas prices. One of the main drivers was the surge in global energy demand, as economic activity picked up after the Covid-19 pandemic. This led to tighter supply, resulting, for instance, in lower volumes of liquefied natural gas (LNG) imports to Europe. A combination of lower gas supplies, a longer heating season 2020-2021 and weather conditions unfavourable to producing renewable energy contributed to further strains. Also, but to a lesser extent, an increased carbon price under the Emissions Trading System (ETS) contributed to the adverse market situation.

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Following Russia’s invasion of Ukraine on 24 February 2022, and its continued and deliberate attempt to use energy as a political weapon, gas and electricity prices reached record levels in 2022, peaking in August. The Commission proposed a series of coordinated actions and measures to address the problem, phase out EU dependency on Russian fossil fuels and help EU countries and citizens tackle the rising prices.

Our joint efforts continue.

Timeline

  1. 10 May 2023

    Launch of first tender for joint gas purchases under the EU Energy Platform

  2. 25 April 2023

    Commission launched the first call for companies to jointly buy gas via AggregateEU

  3. 31 March 2023

    Extension of the Market Correction Mechanism, applicable as of 1 May

  4. 30 March 2023

    Adoption of Regulation EU/2023/706 on a gas demand reduction (1 year)

  5. 20 March 2023

    Commission proposal prolonging the coordinated demand reduction for gas rules (EU/2022/1369)

  6. 1 March 2023

    Regulation 2023/435 entered into force; a REPowerEU chapter added to EU countries’ Recovery and Resilience Plans

  7. 19 December 2022

    Political agreement on 3 Commission proposals: market correction mechanism (22/11), emergency regulation to accelerate renewables permitting (9/11) ,solidarity – coordinated gas purchases (18/10)

  8. 21 October 2022

    Guide by IEA and EC "Coping with the crisis” to increase resilience in SMEs through energy efficiency

  9. 6 October 2022

    Adoption of the Regulation on an emergency intervention to address high energy prices (EU 2022/1854) – proposed by the Commission on 14/9

     

  10. 5 August 2022

    Adoption of the Regulation on coordinated demand reduction measures for gas (EU 2022/1369), proposed by the Commission on 20/7

  11. 20 July 2022

    Communication "Save gas for a safe winter" (COM/2022/361)

  12. 27 June 2022

    Adoption of new Gas Storage Regulation (EU 2022/1032), proposed by the Commission on 23/3

     

  13. 18 May 2022

    The Commission presents the REPowerEU Plan to rapidly reduce dependence on Russian fossil fuels

  14. 21 April 2022

    Campaign by IEA and EC "Playing my part" with energy saving tips to help cut the EU’s reliance on Russian fossil fuels

  15. 8 March 2022

    Communication REPowerEU: “Joint EU action for more affordable, secure and sustainable energy”

Toolbox of measures

The spike in wholesale prices in 2021 brought concerns about the effect on end-users, in particular the most vulnerable consumers. To clarify what measures were possible under the existing EU rules, the Commission published the Communication 'Tackling rising energy prices: a toolbox for action and support' on 13 October 2021.

The Communication documents a range of short- and medium-term initiatives that EU countries can take under the existing legislative framework and other potential responses within the Commission’s remit. 

REPowerEU plan

Within two weeks of the Russian invasion of Ukraine, which escalated the ongoing strain on the energy markets, on 8 March the Commission published the Communication 'REPowerEU: Joint EU action for more affordable, secure and sustainable energy'. The publication outlines the EU's commitment to phase out its dependency on Russian fossil fuels, listing a series of measures to achieve this goal. This blueprint was embraced by EU leaders as part of the ‘Versailles declaration’, in March 2022.

Published on 18 May 2022, the REPowerEU plan presents a comprehensive set of actions and resources aimed at achieving the goals outlined in the preceding communication. The plan is designed to effectively address and fulfil the goals of the previous communication through the following key objectives

  • promoting energy conservation
  • encouraging clean energy production
  • diversifying our energy supplies

By prioritising energy savings, energy efficiency, and the expansion of renewable energy sources, the EU anticipates a twofold benefit: reducing the strain on energy prices and accelerating the green transition. Effective as of 1 March 2023, Regulation 2023/435  mandates that EU countries nations integrate a dedicated REPowerEU chapter into their Recovery and Resilience Plans, covering energy-related reforms and investments.

For additional information regarding the REPowerEU plan and actions, the website REPowerEU: affordable, secure and sustainable energy for Europe provides further details and insights.

One year following the REPower Plan launch, the Commission collected data on the progress per EU country and for the EU as a whole. It is presented in 28 factsheets and described on a separate web page.

REPowerEU – one year on

Security of supply and affordable energy prices

Gas storage

On 23 March 2022, the Commission proposed a new Regulation on measures to safeguard the security of gas supply. It also published the Communication 'Security of supply and affordable energy prices: Options for immediate measures and preparing for next winter' (COM/2022/138), setting out ideas for collective European actions to address the causes of the problem in the gas market and ensure security of gas supply at reasonable prices for citizens and businesses, notably by restocking gas storage facilities.

The Gas Storage Regulation (EU/2022/1032) was agreed upon by the co-legislators in June 2022 and required EU countries to fill their gas storage facilities to 80% by 1 November and to 90% by this point in the years to follow. By November, EU-wide filling levels reached 95% and by January 2023, the filling level remained above 80%, allowing the EU to leave the heating season with 56% of gas still in storage.

Saving gas

On 20 July 2022, the Commission proposed new rules on coordinated demand reduction measures for gas, together with the Communication “Save gas for a safe winter” (COM/2022/361). The new Regulation on coordinated demand-reduction measures for gas (EU/2022/1369) was adopted on 5 August and was valid until 31 March 2023.

On 20 March 2023, the Commission proposed a prolongation of the regulation on the basis that reducing EU gas demand by 15% for another 12 months would ensure the security of gas supply throughout next winter. The new regulation (EU/2023/706), prolonging the measures for another year, was adopted on 30 March 2023. It includes more frequent monitoring and reporting on energy savings data.

Emergency intervention to address high prices

On 6 October 2022, a new Regulation on an emergency intervention to address high energy prices (EU 2022/1854) to reduce the energy bills for European citizens and businesses was adopted, based on a Commission proposal from 14 September 2022. It includes measures to reduce electricity demand to help lower the electricity costs for consumers and suggests a temporary revenue cap on electricity producers using technologies with lower costs, such as renewables, nuclear and lignite. The Commission proposes to set the cap for those “inframarginal” producers to €180/MWh. The third measure is a temporary solidarity contribution to excess profits made in the oil, gas, coal and refinery sectors. It would be collected by EU countries on 2022 profits, which are at least 120% of the average profits of the previous 3 years, and would be redirected to energy consumers. 

On 5 June 2023, the Commission published a report on the emergency energy measures. Based on its findings and given the recovery of the market, the Commission does not consider necessary to prolong the crisis measures at the current time

Solidarity - coordinated gas purchases

On 18 October 2022, the Commission proposed a new emergency regulation to address high energy prices and ensure the security of supply for the coming winter, aiming to enhance solidarity through better coordination of joint gas purchasing. The Regulation (EU) 2022/2576 was adopted on 19 December 2022 and provides a legal framework for the EU Energy Platform to support EU countries in the preparation for winter 2023/24 and notably in the filling of their gas storage facilities.

The package presented on 18 October 2022 also included the adoption of an EU action plan to digitalise the energy system(COM/2022/552 ), suggesting to speed up the use of digital tools (smart meters, electric vehicles, internet of things devices and other innovative systems) which will help consumers save on their energy bills and contribute to ending EU dependence on imported Russian fossil fuels.

Energy savings

The REPowerEU plan included the Communication “EU save energy” (COM/2022/240), which includes simple and immediate behavioural changes to save energy and reduce energy bills for consumers and businesses.

Together with the International Energy Agency (IEA), the Commission published in April 2022 "Playing my part", which includes a series of actions that citizens can take to reduce their energy use, save money and at the same time support Ukraine by reducing the EU's dependence on Russian fossil fuels. The Playing my part report suggests 9 individual actions, that, if implemented by many, will make a difference.

The IEA and the Commission presented in an online event on 21 October 2022 a brief guideline on concrete actions that small businesses can carry out and what specifically tailored support measures are available to them. The “Coping with the crisis – increasing resilience in SMEs through energy efficiency” guide provides advice on immediately actionable steps enterprises can take to reduce their energy consumption and improve energy efficiency.

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Playing my part

How to save money, reduce reliance on Russian energy, support Ukraine and help the planet.

Accelerating renewables permitting

The Commission proposed a new temporary emergency regulation on 9 November 2022 to accelerate the deployment of renewable energy sources. A political agreement was reached on 19 December 2022.

The temporary rules are valid for 18 months and impose the obligation that permit-granting takes no longer than 3 months for solar energy equipment, 6 months for the repowering of renewable energy power plants, 1 month for heat pump installations below 50MW and 3 months for ground source heat pumps.     

The proposal complements previous emergency measures to tackle the exceptional situation in the energy markets and to accelerate the clean energy transition.

Market Correction Mechanism

On 22 November 2022, the Commission proposed a Market Correction Mechanism to protect EU businesses and households from episodes of excessively high gas prices in the EU. The proposed instrument contains safeguards to avoid disruption to the energy and financial markets.

EU energy ministers reached a political agreement on the Market Correction Mechanism rules on 19 December 2022. The mechanism is temporary and will apply for 1 year, entering into force on 15 February 2023.

It will be automatically activated if the month-ahead Title Transfer Facility (TTF) price exceeds €180/MWh for 3 working days and if the TTF price is €35 higher than a reference price for liquefied natural gas (LNG) on global markets for the same 3 working days.

Market corrections will be monitored by the Agency for Cooperation of Energy Regulators and published on their website.

On 31 March 2023, the Commission extended the application of the Market Correction Mechanism to other trading hubs than the TTF. The implementing act will apply from 1 May 2023 and will provide an even broader shield from high and volatile gas prices.

Infographic explaining the market correction mechanism (European Council, 2023).

Joint purchasing of EU gas supplies

Since its launch in 2022, the EU Energy Platform has played a key role in diversifying supplies, increasing efficiency of infrastructure use, and negotiating with reliable international partners.

In 2023, the focus has been on organising demand aggregation and joint purchasing of gas for gas storage ahead of the winter 2023-2024 season. In a record time, and thanks to the close cooperation between the Commission, EU countries and the industry, the Commission was able to put in place an instrument that reinforces security of supply and takes into account the needs of market operators in the EU.

Through AggregateEU, the Commission flagship initiative under the EU Energy Platform, to implement demand aggregation and support more coordinated purchase of natural gas at European level, two tendering rounds have been organised since April 2023. The first were held in May and June/July, covering 26 delivery points and 2 LNG virtual points (North-West, and South-East); for these two rounds, 91 buyers expressed demand of 27.5 billion cubic metres of gas and 85 were partially or entirely matched. Two more tendering rounds are scheduled before the end of 2023. 

Energy efficiency’s role for energy prices

Investing in energy efficiency is the most cost-effective way to save energy and reduce energy bills for public authorities, citizens and businesses. The REPowerEU plan proposes to raise the ambition of the Commission’s 2021 proposal for the EU energy efficiency target to ensure a 13% (rather than 9%) reduction of energy consumption by 2030, compared to the 2020 reference scenario projections.

The REPowerEU plan has a strong focus on energy savings and energy efficiency is key to reaching that objective. Together with IEA, the Commission presented a series of actions in 2022 that can be taken by individuals or SMEs to reduce the overall energy consumption.

Progressing in the uptake of both energy efficiency measures and related investments is important, as medium to long-term measures will contribute to reducing energy prices, providing affordable and clean energy to households and companies and overall increasing the resilience of the EU’s energy system and the internal energy market.

EU countries have currently planned a number of such actions, as part of their Recovery and Resilience Plans. The need to accelerate energy efficiency investments is not only key to mitigating the impacts of high energy prices, but it is also economically beneficial to take advantage of the reduced payback time for energy efficiency and building renovation investments. Many local commercial banks across the EU offer energy-efficiency mortgages and financial lending products with lower credit risk and interest rates.

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