The wholesale price of gas fell sharply in a rare respite from its recent highs amid signs of this Europe Preparing to intervene directly in the energy markets.
The European Commission It said it was working “fully” on an emergency package, and on “long-term structural reform of the electricity market” to combat high prices while efforts to fill gas storage facilities appeared to be ahead of schedule.
The next day’s UK wholesale gas price fell more than 20% to 447p per heat on Tuesday, while next month’s contract fell by a quarter, to 473p per heat.
Prices have fallen from near record highs but are still 12 times higher than they were at the beginning of 2021 before the start of the energy crisis.
It came as Business Secretary Kwasi Quarting announced progress in efforts to reopen the UK’s largest gas storage facility. Energy group Centrica is reusing the crude facility located under the North Sea off the east coast of Yorkshire.
“After months of work, the UK Oil and Gas Regulatory Authority has today granted the required approvals and approvals,” Kwarteng said on Tuesday evening, announcing the green light from the transitional North Sea Authority.
European countries rush to fill gas storage facilities before winter, amid fears Russia May reduce gas supply. European gas storage facilities are now 80% full on average, and are fast approaching the EU’s target for countries to reach 80% full by November 1.
German Economy Minister Robert Habeck said he expects gas prices to fall soon as Germany, Europe’s largest gas consumer, makes progress on storage targets and will not have to pay high demand prices to continue replenishing stocks.
Habeck has reportedly told other European energy ministers that Germany is willing to consider capping the price of gas in Europe, a measure it has previously argued against.
The European Commission is working on as-yet unspecified emergency proposals to ease the cost to households this winter, ahead of a meeting of EU energy ministers on September 9. The long-term plan to intervene in the market appears to be more advanced.
“It’s on the tracks. We are in such a price hike that has opened up the political space,” a European diplomat told AFP, speaking on condition of anonymity to explain the debate.
“The European Commission will launch the impact assessment in the fall and we can expect a proposal by the beginning of next year,” he said.
Commission President Ursula von der Leyen said on Monday that Brussels was preparing for an intervention to separate electricity prices from the high cost of gas, in a bid to ensure that electricity prices reflected cheaper renewable energy.
Von der Leyen’s intervention will increase pressure on the next British prime minister to follow suit and announce a set of measures to tackle the bills. Last week, organizer Ofgem Set the next energy industry price cap at £3,549which will be implemented in October.
Ofgem is consulting on whether to separate the wholesale price of electricity from the price of gas.
RBC Europe analyst John Musk said: “It is clear, in our opinion, that current electricity prices of €700-800 per megawatt-hour are unsustainable and lead to windfalls for some generators.
The question is how long it will take to implement any reform given the need to maintain investor confidence in the authority. With the current high energy prices, we may see more unexpected taxes or voluntary contributions, across Europe, from generators in the transition period while long-term structural reforms are designed and implemented.”
However, there is still uncertainty about the short-term outlook for gas supplies. Russia’s Gazprom will halt natural gas exports to Europe via its main Nord Stream 1 pipeline for three days from Wednesday for maintenance.
The shutdown comes after a 10-day maintenance period in July and the Nord Stream pipeline was already operating at a fifth of its normal capacity. The supply disruption has caused fears that Russia will halt flows entirely as winter demand soars.
On the other hand, one of France’s largest gas suppliers, Engie, said on Tuesday that Gazprom will further reduce deliveries to the company, due to the dispute between them over the application of some contracts. Engi’s shipments from Gazprom have decreased significantly since the beginning of the war in Ukraine.
In Austria, Vienna’s main energy company Wien Energie has asked the federal government for billions of euros in credit to cover margin costs so it can continue to trade in the European energy futures market.