European Union (EU) energy ministers at a key meeting this week again failed to reach a deal on capping the price of natural gas to create a so-called “market correction mechanism” aimed at avoiding the dramatic price spikes seen this past summer in the wake of Russia’s invasion of Ukraine.
There had been hope that a final agreement could have been reached at the meeting of the extraordinary Energy Council on Dec. 13. But there remains very deep divisions among EU countries whether there should be a cap at all, and if it were to be in place, at what price it would be triggered.
Under the European Commission’s original proposal, the cap would go into effect when prices on the Dutch TTF hub hit €275 (approximately $292.8 at current exchange rates) per megawatt-hour (MWh), and came with conditions (GM Dec. 2., p. 34).
Those conditions included that the cap proposal would only be triggered if the €275 per MWh limit was breached continuously for at least two weeks, and then only if the price for liquefied natural gas (LNG) rose above €58 for 10 days within that same two-week period.
Given the conditions, the price cap would not have been activated even when wholesale gas prices briefly soared above €339 per MWh in late August.
Last week, a proposal for a gas price cap of €220 per megawatt-hour (MWh) was floated, but energy ministers were unable to agree agreement (GM Dec. 9, p. 1).
Belgium, Italy, Poland, and Greece have been leading the call for a lower and broad price cap, while some EU countries, like Germany and the Netherlands, remain reluctant about the cap, fearing it could make it harder to secure gas supplies.
Another Energy Council meeting has been set for Dec.19.
The Dutch TTF front-month gas (currently January 2023) closed at €135.1 per MWh on Dec. 15, some €3 lower than a week ago.