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ISSN 2753-7757 (Online)

New European measures to tackle energy market volatility


Ursula von der Leyen speaking to Members of the European Parliament Photo: European Union, 2022
EC President Ursula von der Leyen (centre) speaking to Members of the European Parliament

Photo: European Union, 2022

The European Union (EU) is looking to cap electricity prices and place a windfall tax on energy companies in a bid to tackle astronomically high energy prices and market volatility in the wake of Russia’s war in Ukraine.

In her State of the Union speech before the members of the European Parliament in Strasbourg, France, last week, European Commission (EC) President Ursula von der Leyen emphasised that European sanctions against Russia would remain in place. She stated: ‘I want to make it very clear, the sanctions are here to stay. This is the time for us to show resolve, not appeasement.’


Noting that gas prices had risen by more than 10 times compared to before the pandemic and that the climate crisis was ‘heavily weighing’ on energy bills, with heat waves boosting electricity demand while droughts had shut down hydro and nuclear plants, she proposed a ‘targeted approach’ that would see a mandatory target for EU Member States to reduce electricity use by 5% during times of peak demand and a cap placed on the revenues of low cost energy producers, such as renewables and nuclear. According to Euractiv, the cap would be put at €180/MWh, with the proceeds raised, estimated at €117bn, rechannelled to help vulnerable households and businesses battling with massive increases in wholesale gas prices. In addition, a ‘solidarity contribution’ for fossil fuel companies was proposed, based on taxable surplus profits made in the fiscal year of 2022. This could bring in an estimated €25bn that could be redistributed to EU Member States.


Von der Leyen also outlined plans to set up a task force to seek reliable sources of gas, and the amending of liquidity rules for EU power generators with the key aim of decoupling the price of gas from electricity. She said a ‘deep and comprehensive reform of the electricity market’ needed to be undertaken.


In addition, von der Leyen highlighted that hydrogen could be a ‘game changer for Europe’. She said: ‘We need to move our hydrogen economy from niche to scale…To achieve this, we must create a market maker for hydrogen, in order to bridge the investment gap and connect future supply and demand.’ As a result, a new European Hydrogen Bank is to be created, that will invest €3bn ‘to help build the future market for hydrogen’.


Click here to read New Energy World’s Brian Davis report on the steps the UK and Europe are taking in a bid to tackle the energy price crisis.