EU energy ministers to tackle price discrepancy among member states

Energy ministers in the European Union want to level energy prices across member states and prevent discrepancies that see some member states paying up to seven times more for energy than others.

Energy prices are significantly higher in the EU since Russia’s invasion of Ukraine, even as the bloc acted to reduce its dependence on Russian energy.

The Czech Republic, Denmark, Lithuania, and Romania have all seen prices surge by 87% on average, with gas bills in Belgium rising by almost 100%.

Yet member states that rely on renewable power, such as Portugal and Spain, or see a large share of their input from nuclear power, such as France, have been able to weather the spike in wholesale prices and consumer bills better.

Germany, Belgium and Denmark are the top three EU countries paying the most for electricity, while Hungary, Bulgaria and Malta pay the least, according to data from the European Commission.

Households in Germany pay four times as much for electric power as those in Hungary.

Natural gas brings greater discrepancies among the EU

Gas prices are seen as even larger distortions.

Sweden, the Netherlands and Denmark pay the most while Hungary, Croatia and Romania pay the least of all EU countries.

The gap between Sweden and Hungary is up to seven times as large.

“We need to decarbonise our energy while getting the energy prices down at the same time,” Energy Commissioner Dan Jørgensen told reporters at the Energy Council on Monday.

Michael Damianos, Cypriot minister for energy, commerce and industry, said the EU grids package recently presented by the European Commission is “essential” to lower energy prices across the bloc.

“It is vital to lower energy prices for our people and we do believe that this is central to competitiveness. I think the energy crisis has shown that we need to act collectively as a union in whatever we do,” Damianos told reporters on Monday, a couple of weeks away from the EU Cypriot Presidency taking the bloc’s reins.

A recent analysis from the Institute of Security Studies (ISS) states that the EU should double efforts to electrify the economy and locally generate energy.

“It is the most effective antidote to Russian interference in the energy system,” reads the ISS analysis.

Arduous mission

Ministers are now following directives laid out by the Commission.

The EU executive spotted inefficient grid interconnections, slow permitting, fragmented national planning, and uneven investment as significant barriers to competitiveness and keeping energy prices high, according to a leaked document seen by Euronews.

However, the task is arduous for energy ministers to effectively stabilise energy prices across the bloc, since energy policy is a national competence and taxation is applied differently across member states.

EU lawmakers will soon reopen talks to revise the electricity market design law following the Commission’s recent omnibus proposal to simplify environmental legislation.

The EU executive wants to speed up permitting for renewable projects to increase the share of clean power in the grid.

Two-way contracts to make a difference

The Commission suggested that actions at the national level on key areas can be instrumental in addressing price levels. Some of the initiatives floated include efficient network charges and anticipatory grid investments.

Other possibilities include the uptake of two-way contracts for difference, a financial mechanism, increasingly mandated in the EU for new renewable and nuclear energy investments, grid connections, or energy taxation, according to the document.

Recently, the Commission approved the construction and operation of the first nuclear power plant in Poland, which will operate under two-way contracts for difference, a method increasingly used and encouraged by the EU for renewable energy projects.

This system is intended to provide stable revenue for the nuclear plant over 40 years.

“Under the contract for difference, the Polish state will pay the energy producer if market prices fall below a strike price that will be determined according to a clear methodology reviewed by the Commission. If market prices exceed this strike price, the energy producer will pay the difference to the Polish state,” the EU executive said.