Speech by Commissioner Simson on the Communication on Energy Prices

Good afternoon and welcome to our College read-out,

Today, the College adopted a communication on energy prices, which I will present to you shortly.

Additionally, the College adopted a joint communication with the HRVP on a renewed EU strategy for the Arctic.

My colleague Commissioner Sinkevičius will be with you after this press conference to present the details.

Then, Commissioner Gabriel presented the legal proposal to make 2022 the European Year of Youth, as announced by President von der Leyen during the State of the Union.

This proposal will be formally adopted tomorrow.

Vice-President Šefčovič presented to us the Commission’s proposals related to the Ireland and Northern Ireland Protocol.

He will present them to you as well later today.

Furthermore, the President briefed us on her recent international engagements, including the Western Balkans Summit last week, and the EU-Ukraine Summit and the G20 videoconference on Afghanistan, both of which took place yesterday.

Finally, the College also discussed the recent ruling by the Polish Constitutional Tribunal on the compatibility of the Polish Constitution with certain provisions of the Treaty on European Union.

The President emphasised first that our objective must be to ensure that the rights of Polish citizens are protected and that they can enjoy the benefits of the EU in the same way as all EU citizens.

She explained that an in-depth analysis is ongoing but that a first, initial assessment points to very serious issues in relation to the primacy of EU law.

Pending a confirmation of the concerns by the final analysis, the President presented a series of possible options to address the concerns, ranging for example from launching a new infringement procedure, to the use of rule of law conditionality to updating the existing Article 7 procedure.

The College will return to these issues once the legal analysis of the ruling has been finalised.

Coming back to the energy prices, we all know that today energy prices are making the headlines across the EU. Everywhere, people ask: Can I pay my next bill? How long will it last? What can be done?

Their concern is understandable and justified: winter is coming and for many, electricity bills are larger than they have been for a decade. We have seen gas prices surge across the world, driven mostly by demand in Asia. As the world starts to recover from COVID, it is hungry for energy.

As this is a situation that has an impact on most Europeans, they are also looking to Europe for a response. This was the message from the European Parliament and Energy Ministers, and the topic will be discussed by EU Heads of State or Government next week.

Today, we are providing that European response.

Our answer to what should be done is two-fold: first, our immediate priority is to protect Europe’s consumers, especially the most vulnerable.

Second, we have to make our energy system better prepared and more resilient, so that we don’t have to face a similar situation in the future.

In the short term, Member States are best placed and equipped to act. No two Member State have exactly the same energy mix or identical social situations, so the measures have to be Member State-specific as well.

Addressing energy poverty and protecting consumers is a long-standing EU priority, so it means that our rules already allow and in fact encourage the Member States to take action.

Most directly, they can provide vulnerable consumers with financial support, either simply by paying a lump sum to mitigate the impact of the prices, by issuing vouchers or by covering part of the bills.

This may seem a tall order for Member States still recovering from the devastation of the pandemic. However, ETS revenues have been steadily increasing and we call on the Member States to use that additional income to address the social impact of the energy price surge, where needed.

In our assessment, Member States received an additional 10.8 billion euros in the first nine months of 2021, compared to the same period in 2020. There is no limit to how much of this can be used to protect vulnerable households.

The EU taxation policy allows Member States to apply a reduced tax rate on energy used by households – or even exempt vulnerable households entirely. Reduced VAT rates are also an option, as long as EU minimum rates are respected.

And finally, to shield the people in the most difficult situation, Member States can put in place measures that ensure no one is disconnected from the grid and that bill payments can be temporarily delayed.

In the toolbox, we also clarify how Member States can support businesses, in line with EU state aid rules, together with other measures to ease access to energy – for instance by facilitating power purchase agreements.

To complement Member State action, the EU will have a zero tolerance policy on any market manipulation or speculation. We are investigating indications for any possible anti-competitive behaviour in the energy market, in partnership with national competition authorities and energy regulators.

To dispel concerns about possible speculation on the ETS market the Commission will also ask the European Securities and Markets Authority (ESMA) to further enhance the monitoring of the European carbon market.

However, it is worth noting that the effect of the gas price increase on the electricity price is nine times bigger than the effect of the carbon price increase.

In parallel, we will continue to reach out to our international partners, to improve the liquidity and flexibility of the global gas market and ensure sufficient supplies. Indeed we have already had good news about increased supplies coming from Norway.

Beyond the urgency to act here and now, we must look at our energy system and its ability to respond more strategically. We propose action on three fronts.

First, EU’s internal electricity market is a great asset and has served us well. As we integrate a growing share of renewables into the grid, we need to maintain the stability and predictability of the market. With that in mind, we are proposing measures to step up flexibility, storage and cybersecurity.

We are also tasking the Agency of European Energy Regulators to conduct a study on the benefits and possible drawbacks of the electricity market design in the light of the current experience of volatile prices.

The study will be ready by April, but I will liaise with ACER to get preliminary findings already by mid-November, to feed discussion with energy ministers.

The second crucial element is to ensure a well functioning and more resilient gas market framework. Gas has a role in the transition, but at the same time its contribution is bound to change in the long term. It will have to become green, be it biomethane, e-gases or renewable hydrogen.

To promote this process, I will present before the end of the year a comprehensive legislative package to decarbonise our gas and hydrogen markets by 2050.

As part of this package, we will be addressing two topics that are especially relevant in today’s context.

First, security of supply and storage. Today, gas storage is not available everywhere in the EU and a more integrated European approach could potentially optimize costs and protect against price volatility. We will look into issues like making access to storage easier and ensure that storage capacities are optimally used.

Second, we will explore the potential benefits and design of voluntary joint procurement of reserve gas stocks, in line with energy market regulation and the EU competition rules.

Finally, the only long-term remedy against demand shocks and price volatility is a transition to a green and more efficient energy system based on mostly local sources.

Wind and solar have continued to provide the most affordable electricity on the market throughout the crisis. Last year, in the Member States with most renewables in the energy mix, electricity prices went negative for more than 1800 hours.

I want to be very clear: We are not facing an energy price surge because of our climate policy or because renewable energy is expensive. We are facing it because the fossil fuel prices are spiking we do not yet have enough of that green, affordable energy for everyone. We need to speed up the green transition, not slow it down.

In many ways, we have already presented our plan to avoid today’s situation in the future: it is the European Green Deal. The Fit for 55 package sets out an ambitious path towards a renewables-based energy system that operates much more efficiently than we currently do. It will make us more independent, the energy more affordable and of course our carbon footprint much smaller.

Still, there are areas where we can do more: for example permitting, that has become one of the biggest bottlenecks for renewables deployment. Or a wider roll-out of renewable energy communities and power purchase agreements.

The need for energy efficiency is often underestimated, but our current situation should make its necessity obvious. To push for more energy savings, we will soon propose an update to the Energy Performance of Buildings Directive.

We also encourage national, regional and local governments to take full advantage of the unprecedented EU funds available and invest in renewables, renovation and other energy efficiency measures.

These are the policy recommendations we set out in the Energy Prices Communication today: a toolbox of measures that can be rolled out at EU and national level.

Recent weeks have reminded us why energy independence and security of supply are crucial. We should draw the correct conclusions from today’s price surge and move faster towards a climate-neutral energy system that will boost our competitiveness, increase our prosperity and preserve our autonomy.

Thank you.

For more information:

Press conference by Commissioner Simson on the Communication on Energy Prices