The head of the EU Agency for the Cooperation of Energy Regulators (ACER), Christian Zinglersen, has warned that the EU natural gas cap will likely not lower costs for consumers and businesses so long as EU nations rush to refill their depleted reserves.
Zinglersen said that the so-called ‘market correction mechanism’ the bloc’s ministers agreed upon is “unprecedented, untested,” in an interview with the Financial Times on Tuesday. He went on to say he doubts it would help prevent the types of price elevations which afflicted energy markets across Europe over the summer, noting he would be, “reluctant to rely on this gas price cap.”
EU energy ministers agreed on Monday upon an emergency price cap set on wholesale gas of €180 ($191) per megawatt-hour (MWh), which will go into effect if Dutch TTF natural gas futures exceed the set limit for three days. In the summer, as nations rushed to fill their reserve storage capacities prior to the onset of winter, prices hit a record high of over €300/MWh.
EU Energy Commissioner Kadri Simson as said that “with such a mechanism Europe will be better prepared for the next winter season,” however Zinglersen has less belief in the efficacy of such a system, saying the EU might have been better served pursuing other measures.
He said, “Obviously the gas price cap is being negotiated back and forth. . . risked pushing those other things that are hopefully a little less controversial but still super important,” adding it was “a difficult creature.”
Experts have warned that such a price cap might only serve to make it more difficult for European importers to acquire gas shipments, as suppliers will redirect their supplies to Asia, if the capped European price is significantly lower than the price in Asia. Analysts fear this may be particularly true as China fully reopens its economy, particularly given increased EU consumption.
The International Energy Agency has noted, its research indicates that the EU could face a shortage of 30 billion cubic meters of gas in 2023, without Russian gas supplies available. That is an amount nearly equal to the annual consumption of the Netherlands.
