EU chief Von der Leyen vows to reform energy markets

EU chief Von der Leyen vows to reform energy markets

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European Commission President Ursula von der Leyen says now is the time for the bloc to impose a price cap on the Russian pipeline.

John Thys | AFP | fake images

The European Union will launch a “deep and comprehensive reform” of the electricity market, European Commission President Ursula von der Leyen said on Wednesday.

In his annual State of the Union address, delivered at the European Parliament building in the French city of Strasbourg, von der Leyen said the market was designed on the principle of merit order and is not fit for purpose.

“Consumers should reap the benefits of low-cost renewables,” he said, “so we need to decouple the dominance of gas price from electricity price.”

Von der Leyen also said there had been a shift from pipeline gas to greater use of liquefied natural gas, but the benchmark used in the gas market, TTF, had not been adapted.

He said the commission would work on developing a more representative benchmark for trading that reflects this change, and would also ease liquidity pressures on energy providers by amending rules on collateral and taking steps to limit volatility in prices. intraday prices.

An energy crisis of both supply and price in Europe came to a head earlier this month when Russia indefinitely halted gas flows to Europe through the key Nord Stream 1 pipeline.

EU energy ministers met on Friday to discuss a five-point plan that includes a price cap on Russian gas, a windfall tax on profits from fossil fuel companies, a cap on the revenue of nuclear companies and renewables, a mandatory target to reduce energy use in peak hours. by 5% and emergency lines of credit for electric companies.

Russian President Vladimir Putin threatened to ignore existing contracts and completely cut off energy supplies to Europe after the plan was announced.

Addressing windfall and tax cap plans, von der Leyen said that while profits are not necessarily a bad thing, “it is wrong to receive windfall record windfalls and profits profiting from the war and on the backs of our consumers.” .

“In these times, profits must be distributed and channeled to those who need it most.”

She said that millions of households and businesses across the European Union were struggling with price increases and fearful for the future.

The tax on profits from fossil fuels would provide 140 billion euros ($139.8 billion) to be divided among member states to support the energy bill, it added.

Von der Leyen said a priority for the bloc must be to end its dependence on Russian gas, with the country’s imports falling from 40% last year to 9% now.

“We agreed to join storage, we are now at 84%, exceeding our targets,” he said.

But, he continued: “This will not be enough. We have to diversify away from Russia to reliable suppliers like the United States, Norway, Algeria and others,” as well as invest more in renewables and LNG terminals.

Fitch: EU should balance gas market despite suspension of Russian supply

‘Putin will fail’

Ukrainian First Lady Olena Zelenska attended Strasbourg as the guest of honor and received a standing ovation from parliamentarians.

Zelenska tweeted that she wanted to “personally thank” von der Leyen for her contribution to Ukraine becoming a candidate for EU membership.

Von der Leyen, who delivered the speech wearing the yellow and blue colors of the Ukrainian flag, made impassioned remarks about the war, saying that Ukraine had faced the “face of evil” after the Russian invasion on February 24.

“There is a lot at stake, not only for Ukraine but for all of Europe and the world in general,” he said, paying tribute to the victims of the war, which he said was also an attack on the economy, energy, values ​​and the future of Europe. .

“This is about autocracy versus democracy and I am here with the conviction that with the necessary courage and solidarity, Putin will fail and Ukraine and Europe will prevail.”

“Today courage has a name and that name is Ukraine. Courage has a face and that face is the face of the Ukrainian men and women who stand up to Russian aggression.”

Kyiv forces have reclaimed thousands of miles of Russian-occupied land in recent days, raising fears about Moscow’s next move. Russia launched an intense bombardment in the Kharkiv region on Saturday.

Von der Leyen also said that the sanctions against Russia “are here to stay” and that it was the “moment for resolution and not appeasement.”

Three-quarters of Russia’s banking sector had been cut off from international markets, almost 1,000 international companies had left the country, its car production fell by 75% compared to last year, and its “industry is in tatters”, with its soldiers dismantling household appliances. for parts due to semiconductor shortages, he noted.

He added that he wanted to extend “continuous access” to the EU single market to Ukraine and would travel to Kyiv on Wednesday to discuss this with Ukrainian President Volodymyr Zelenskyy.

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