Considerations on COM(2023)761 - Amendment of Regulation (EU) 2022/2578 as regards the prolongation of its period of application - Main contents
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| dossier | COM(2023)761 - Amendment of Regulation (EU) 2022/2578 as regards the prolongation of its period of application. |
|---|---|
| document | COM(2023)761 |
| date | December 21, 2023 |
(2) The MCM is to be activated where a market correction event occurs, that is, when the front-month Title Transfer Facility (‘TTF’) derivative settlement price, as published by ICE Endex B.V., exceeds EUR 180/MWh and is EUR 35 higher than the reference price for three working days. Upon the occurrence of a market correction event, Regulation (EU) 2022/2578 sets a dynamic bidding limit, according to which market operators should not accept and market participants should not submit orders for derivatives with prices of EUR 35/MWh above the reference price published by the Agency for the Cooperation of Energy Regulators (ACER)2 on the previous day.
(3) In their effects assessment reports published on 1 March 2023 in accordance with Article 8 of Regulation (EU) 2022/2578, ACER and the European Securities and Markets Authority (ESMA) 3 analysed a number of indicators to assess the impact of the MCM since the entry into force of that Regulation. ACER and ESMA concluded that the MCM had not been activated and no negative effects on security of supply and intra-Union flow to financial markets and stability had arisen until the publication of their respective report.
(4) Building on the indicators analysed by ACER and ESMA in their reports of 1 March 2023, the Commission extended the analysis to assess the market developments in more recent months. No negative effects have been identified since Regulation (EU) 2022/2578 entered into force and the MCM has never been activated.
(5) However, severe difficulties persist for the Union’s security of energy supply. The global situation on the gas market remains very tight. Gas prices are still considerably higher than pre-crisis with inevitable consequences on Union citizens’ purchasing power and the competitiveness of Union businesses.
(6) Market volatility is also a consequence of the market tightness resulting from geopolitical risks, and represents an additional risk for the Union economy. The episodes of pronounced price volatility observed in summer and early autumn 2023, when prices increased by more than 50% in a few weeks, show that markets are still fragile and remain vulnerable to even relatively small shocks on demand and supply, as evidenced by price movements following recent events such as the strike in Australian liquefied natural gas (LNG) facilities, or the disruption of the Balticconnector. The ongoing crisis in the Middle East constitutes an additional significant geopolitical risk with potential impact on prices and gas supply.
(7) Global gas markets are currently very tight and are expected to remain tight for a certain time. Global LNG supply grew only modestly in the past two years because of limited liquefaction capacity additions, outages at major export facilities and declining feedgas supply at LNG plants. Significant new LNG liquefaction capacity is set to come online only in the course of 2025. Hence, market balances remain precarious in the immediate future.
(8) Furthermore, due to the significant decrease in Russian pipeline gas imports over the past year, availability of gas supplies to the Union is considerably reduced compared to the pre-crisis situation. With the current level of gas imports, the Union is expected to receive approximately 20 bcm of Russian pipeline gas in 2023, approximately 110 bcm less than in 2021. Therefore, a serious risk remains that gas shortages will occur in the Union in the short term. In view of the current tight market conditions, prices may spike again on the back of unpredictable events and sudden shocks such as a rebound in Asian LNG demand that could reduce the availability of gas on the global gas market; extreme weather conditions potentially affecting hydropower storage or nuclear production which would require higher recourse to gas-fired power generation; and further possible gas supply disruptions, including a complete halt of gas imports from Russia, and further disruptions of critical infrastructures, after the acts of sabotage against the NordStream 1 pipeline in September 2022 and the disruption of the Balticconnector pipeline in October 2023.
(9) Persistent severe difficulties expose the entire Union to risks of energy shortage and high energy prices. The level of gas prices could impact negatively the Union’s economic situation, industrial competitiveness and citizens’ purchasing power.
(10) Under these conditions, notably in a situation of several geopolitical risks with potential impact on gas prices, the fear of scarcity may trigger large reactions which can have serious repercussions on prices. Given the current tight supply and demand balance, even moderate disruption to the supply of gas could have a dramatic impact on the gas prices and could cause serious and lasting harm to the economy and to the citizens of the Union.
(11) At the peak of the crisis, the Union adopted a strong and coordinated response to protect its citizens and its economy against excessive prices and to make sure that gas flows to all consumers in need across borders, also in situations of gas scarcity. The Union’s response under the REPowerEU Plan4 and subsequent initiatives, including the measures set out in Regulation (EU) 2022/2578, contributed to improve the situation. Should those measures cease to apply, this would risk altering the stabilised but fragile situation the Union has achieved and would deteriorate the resilience to possible future events and sudden shocks, such as those mentioned above.
(12) Since the Union is a single market and the TTF is commonly seen as the ‘standard’ pricing proxy on Union gas markets, high gas prices for the derivatives linked to TTF would have severe consequences in all Member States, although possibly to degrees depending on the Member State. Derivatives linked to all other VTPs in the Union should also remain included in the prolongation of Regulation (EU) 2022/2578 so as to avoid possible shifts of trade to derivatives linked to other VTPs which may lead to distortions on the Union energy or financial markets. The MCM strengthens the Union’s solidarity by avoiding excessively high gas prices, which are unsustainable even for short periods of time for many Member States. The MCM can help ensure that gas supply undertakings from all Member States are able to purchase gas at reasonable prices in a spirit of solidarity.
(13) The prolongation of the period of application of Regulation (EU) 2022/2578 constitutes an emergency measure in response to persistent severe difficulties in the supply of energy which entail a risk of imminent crisis and require that the measure set out in that Regulation, which contributes to keep prices in check, continues to apply
(14) Taking into account the fact that Regulation (EU) 2022/2578 will cease to apply on 31 January 2024, the prolongation of its period of application constitutes an emergency measure in a spirit of solidarity between Member States, which aims to respond to persistent severe difficulties in the supply of energy. Such difficulties also entail a risk of imminent crisis and excessively high prices especially if events such as the ones described above were to materialise.
(15) A prolongation of the period of application of Regulation (EU) 2022/2578 is also consistent with the REPowerEU Plan, which aims to protect Union citizens and economy against excessive prices and energy supply shortages.
(16) This Regulation should enter into force on 1 February 2024 in order to ensure a continuous protection against excessively high prices throughout the 2023/2024 winter season.
(17) The extended provisions should be temporary and should remain in force until the end of January 2025. The prolongation by one year is necessary and proportionate due to the persistent nature of the severe difficulties and the additional risks described above, and the uncertainty of the current situation.
(18) Since the objective of this Regulation cannot be sufficiently achieved by the Member States, but can rather be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve that objective.
(19) Regulation (EU) 2022/2578 should therefore be amended accordingly.