The European Commission will assess the effect of "subsidising or capping" the gas-fired generation price and redistributing infra-marginal revenues on national level "on a case-by-case basis", if member states use such instruments, commission president Ursula von der Leyen said.
These emergency measures limiting the effects of gas prices on electricity should avoid internal market "distortions", preserve long-term clean energy investment signals and preclude "excessive additional" demand for gas, von der Leyen said in a letter to EU leaders ahead of a European Council meeting in Brussels on 19-20 March.
The commission is looking at "targeted" short-term measures rather than "structural" changes, energy commissioner Dan Jorgensen said. The EU has a "very clear" interest in keeping the electricity market design as it is. "We need the market to function and we need to make sure that we have security of supply, which is what the marginal pricing system secures us," Jorgensen added.
Other measures proposed by von der Leyen include better use of power purchase agreements and contracts for difference.
For carbon markets, von der Leyen submit a proposal to increase the "firepower" of the market stability reserve (MSR) to decrease the price of EU emissions trading system (ETS) allowances. And von der Leyen said there were discrepancies between taxes and levies imposed on energy sources. "In many cases, electricity is taxed much more heavily — up to fifteen times — than gas," von der Leyen said.
Emergency measures could be approved by a qualified majority of EU states under an emergency procedure. But Germany has already rejected any intervention by the commission on the bloc's electricity market and merit-order system.
Speaking at a meeting of energy ministers on Monday, German energy minister Katherina Reiche said the bloc's current energy market model, with a merit-order system and marginal pricing, is the "most efficient" for determining electricity prices cost-effectively, while keeping markets liquid.
"The interventions that are being proposed would ultimately lead to higher prices. At this moment, that would send exactly the wrong signal," Reiche said, adding that renewing imports of Russian natural gas is not an option.
Reiche is open to see how additional government revenues via energy taxes can be distributed more fairly.
Swedish energy minister Ebba Busch sees no "magic wand" for current energy prices. Measures to fill storage ahead of the coming winter should be implemented in a way that does not penalise countries like Sweden that have done their "homework" by moving away from natural gas and other fossil fuels, Busch said.
Introducing price caps or phasing out the ETS is a "difficult proposal" because high carbon prices benefit many state budgets, Polish energy secretary Wojciech Wrochna said.
"We cannot cut the revenues from one day to another," he said, calling for a "targeted, urgent, country-specific" solution. Gas is not the problem, "it's the ETS cost", Wrochna added.
