Last Updated on Friday, 30 September, 2022 at 3:07 pm by Andre Camilleri
Malta has successfully negotiated another derogation from a European Commission proposal that imposes on member states mandatory reductions in electricity consumption, the government said in a statement.
This derogation was sealed by Minister for the Environment, Energy and Enterprise Miriam Dalli, in negotiations held during the extraordinary Energy Council that was held today in Brussels. This derogation was important for Malta, as a country that is heavily dependent on electricity. Any mandatory reduction in electricity demand would have a negative impact on families and businesses.
This is the third derogation that Malta obtained in this sector, the government said. Last August, the Energy Council agreed on 15% mandatory reductions in gas consumption. Malta had convinced the European Commission that due to our island peculiarities, Malta should not carry this additional burden. And last year, Malta also successfully negotiated another derogation by which the proposed gas pipeline retained its status as a Project of Common Interest.
The last proposals presented by the European Commission are aimed at addressing energy supply issues that Europe is currently facing, issues that are set to escalate as gas consumption in winter increases. Despite Malta’s successes in obtaining these derogations, the government remains committed to encourage and incentivise the public sector, the private sector, and households to reduce energy waste and increase their energy efficiency.https://player.vimeo.com/video/755549991?h=0373e6310a
Speaking to the media ahead of the meeting, Minister Dalli expressed concern that the European Commission’s proposed measures would not alleviate the problem for all member states. Malta is pushing for a solution to lower gas prices, as the current proposals do not contribute to this aim.
The European Commission proposal stipulates a 10% mandatory reduction in electricity consumption and other reductions when demand is at its peak. During peak demand, the proposal specifies that consumption has to be 5% of gross electricity compared to the previous five years. This regulation would require the issuing of tenders by the private sector to compete in reducing their consumption while seeking compensation for the business lost during the hours when consumption has to be reduced. The entity that seeks the lowest amount of compensation would win the tender and have to reduce consumption to equal to the amount declared in the tendering process. Such a measure is expected to affect business competitiveness negatively and could also result in lower productivity which would affect employment.
Addressing the Council meeting, Minister Dalli stressed the importance that only those measures that can directly lead to a reduction in electricity prices should be implemented. Malta imports around 20% of its electricity from the interconnector with Sicily. However, those prices are amongst the highest in the EU. Minister Dalli emphasised the need to analyse gas consumption reduction measures properly. “We need to heed our peoples’ concerns, families, businesses and industries. As a Union, we cannot jeopardise the competitiveness of the whole European economy that would result in lower investments and risking livelihoods”, she stated.
Malta is one of the 15 EU member states pushing for a cap on gas prices to lower electricity prices derived from gas-generated production. The idea is to cap prices dynamically, as opposed to a fixed capping, which would be tied to non-EU indexes so that while the EU would remain attractive for LNG producers, it would eliminate prevailing market speculation.
EU ministers adopt windfall levy, no deal on gas price cap
European Union energy ministers on Friday adopted a package of measures to soothe the energy crisis, including a windfall levy on profits by fossil fuel companies, but a deal on capping gas prices remained off the table.
With energy prices skyrocketing across Europe since the Russian invasion of Ukraine, EU member countries reached a deal on proposals from the European Commission that the bloc’s executive arm said could help raise $140 billion to help people and businesses hit by the crunch.
The measures include a levy on surplus profits made by companies producing or refining oil, gas and coal. The two other main elements of the plan are a temporary cap on the revenues of low-cost electricity generators such as wind, solar and nuclear companies, as well as an obligation for the 27 EU countries to reduce electricity consumption by at least 5% during peak price hours.
The text should be adopted next week and enter into force soon after.
Estonian Economic Affairs and Infrastructure Minister Riina Sikkut said that “the most promising measure to actually bring down the average price is still the reduction of peak consumption.”
Sikkut underlined that any hardship this winter will be nothing compared with the price being paid by Ukrainians. “We can’t forget that we are in a situation of war. Ukrainians are paying with their lives, so we temporarily may pay higher bills or prices in the food store,” she said.
The measures, however, will not have an immediate effect on the gas prices that have been running wild as Russia reduced its supplies.
“This is just the first part of the puzzle and an immediate patch,” said Czech Industry and Trade Minister Jozef Sikela, who chaired the meeting in Brussels. “We must not stop here; we are in an energy war with Russia; the winter is coming. We need to act now… Now means now. Now is not in a week and definitely not in a month.”
A group of 15 member countries has urged the European Commission — the EU’s executive arm — to propose a cap on the price of wholesale gas as soon as possible to help households and businesses struggling to make ends meet.
“The price cap that has been requested since the beginning by an ever increasing number of member states is the one measure that will help every member state to mitigate the inflationary pressure, manage expectations and provide a framework in case of potential supply disruptions, and limit the extra profits in the sector,” they said.
The proposal will be discussed during Friday’s meeting but has yet to gather unanimous support, with Germany notably blocking.
The European Commission has warned in an analysis that such a cap could weaken the bloc’s ability to secure gas supplies on the global market. But it is open to the idea of introducing a price cap on Russian gas to mitigate the impact of the crisis while negotiating a lower gas price with other suppliers.
“We are negotiating with our reliable suppliers of pipeline gas. If this doesn’t bring results, then a price cap is possible. Russia is not a reliable partner. In fact, it is at the origin of the problem,” said Kadri Simson, the EU commissioner for energy. “I strongly believe we need a price cap on all Russian gas imports, at a level that still makes it attractive for them to export to Europe.”
According to the European Commission, Russian gas supplies to the EU declined by 37% between January and August this year.