Anger in Brussels as it emerges EU may subsidise cheap power for Britain

 Low prices on the continent could see electricity vacuumed up by export markets

Source - Daily Telegraph - 25/10/22

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Plans to cut EU energy bills have sparked anger in Brussels after it emerged the bloc may end up subsidising cheap power for Britain

Low prices on the continent could see electricity vacuumed up by export markets, European Commission officials are warning.

One solution would be to charge higher prices to export markets such as Britain but officials fear this could be in breach of the Brexit agreement.

Soaring gas prices, triggered by shortages due to Russia’s war on Ukraine, have wreaked havoc across energy markets due to the core role of gas in both electricity generation and heating.

Ministers across the EU and the UK are scrambling to find ways to bring prices down.

In the EU, one measure on the table is to cap the amount that can be charged for electricity from gas-fired power generators. In return, the state would help to pay for fuel costs.

It is hoped this would cut not only the price for gas power stations’ output, but also the price for other generators’ output by lowering the clearing price across the market.

However, the Commission is warning that an unintended consequence could be an increase in exports of cheap power to non-EU countries.

This would increase the amount of gas burned in the EU and effectively mean that the bloc would be funding cheaper power in countries such as the UK and Switzerland, the Commission said.

“The effectiveness of the measure as regards both lowering electricity prices and avoiding additional gas consumption is highly dependent on the extent to which increased flows of subsided electricity to non-EU countries can be avoided,” it says, in papers seen by The Telegraph.

To stop this from happening, the Commission suggests either extending the scheme to the UK or applying the price cap only in the EU.

However, it warns that many of its trade agreements – including the Brexit deal – “prohibit the creation of higher export prices”.

Its concerns highlight the huge challenges facing politicians as they try to bring prices down in complex, cross-border energy markets.

European ministers met on Tuesday to discuss options to try to tackle the energy price crisis as winter looms.

“Time matters and we have to be fast,” Jozek Sikela, industry minister for the Czech Republic, which holds the EU’s rotating presidency, said on Tuesday. “The game is not over and the winter is coming.”

Kathryn Porter, consultant at Watt-Logic, believes the scheme may never be implemented, given the risks and complications, including the need to preserve EU gas stocks.

“We're having a warm winter so demand is lower than expected,” she said.

“But the real problem is going to be next summer. Where is the gas going to come from to restock storage facilities?”