The Czech Republic wants to discuss a possible ceiling on energy prices at the European level, and is holding a meeting of the European Council of Ministers for this purpose. Prime Minister Viala (ODS) on Monday discussed possible extraordinary energy measures with German Chancellor Olaf Schulz, who has arrived in Prague. “Germany is a very important player,” Jaroslav Mel, former director of the Eastern Exclusive Economic Zone and former government commissioner for nuclear energy, told Radiožurnál.
How important is Germany to take EU-wide action on energy prices?
Germany is a very important player, because all the problems that arise in the field of energy are caused by the overwhelming majority on the part of Germany, both in gas supplies and electricity prices.
Energy expert and former government commissioner for nuclear energy, Jaroslav Mel, says pan-European energy price gouging is almost unrealistic.
With a high percentage of renewable resources, Germany needs a large number of gas-fired power plants to stabilize the system. Because of the high price of gas, the electricity in the transformer has reached the height it has. Above all, only Germany will be able to control this matter.
A European agreement would be better, of course. But I don’t believe in a European agreement to limit electricity prices. This is almost unrealistic and will cost a lot of time, energy and money. Pricing for gas used to produce electricity is much more efficient. This means the so-called shutdown of power plants, which essentially raise prices on the stock exchange.
If this succeeds, and I am personally convinced that this is a very real and fast course, there will be a significant drop in prices for the next tradable period on the exchange. Electricity set prices and prices will be mainly hard coal power plants, but of course those with much lower production costs will also have a larger share.
We can feel it very quickly on our backups. Such a measure has a dramatic anti-inflation effect, and any effort to reduce electricity prices in Europe is essentially a solution to the effect. When we remove the reasons by setting the price of generating electricity from gas-powered plants, that is, we are the ceiling of the price of gas. They can do this even without a European agreement.
How difficult is it to determine the price of gas used to produce electricity only? What is the complexity of accounting for the separation of gas that goes into the production of electricity on the Stock Exchange?
Germany can do that, so they support the teams for gas suppliers if they want to. Of course, any other agreement can be made, for example, the removal of gas power plants from the specified factor on the stock exchange can be changed to a different accounting format. This is a technical issue, but the most elegant of course is to support the gas supplier until the price of gas returns to the level it was, say, 18 months ago.
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Let us realize that in this case the costs from Germany will be 20 percent of what Germany provides for the various compensations. It would be the same in Europe. All efforts to eliminate the causes are always much cheaper than if you deal only with the consequences. If the reason is the high price of gas to produce electricity, let us get rid of it in this way.
The second option, which Europe unfortunately rejects, but which is worth implementing, is to completely eliminate emissions allowance payments to emissions sources for the next year or two, because people simply cannot afford them. The so-called carbon dioxide tax applies only in Europe, and nowhere else in the world.
I’m not convinced that it leads to fewer emissions and citizens feel better about us trying to switch to other sources of energy. Unfortunately, that is not the case.
In addition to setting a final ceiling on gas prices or canceling the prices of gas that goes to gas-fired power plants. If this happened, wouldn’t it cause the market to stall, forcing traders to sell at our price ceiling?
This way, there is no market, let’s face it, there is no market. What is traded is only parts of the production, which unfortunately determine the price of long-term contracts. But the energy industry is a sector that generates long-term investments and long-term returns, and therefore it should operate primarily in long-term bilateral contracts and not in the short-term spot market.
You say that, but we know that the spot market exists today.
It is there, but it does not work because it is affected by the subsidies of renewable sources, the penalty for fossil power plants, allowances and, of course, the fact that gas is a weapon. It is not only about gas prices from Russia, because it is simply not at such prices. This is about speculation in this market.
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Note, in the past year allowances have jumped into multiples. Europe and the Commission denied that this was mere speculation, only admitting two months later that the allowances were the subject of speculation by financial institutions. However, at that moment, neither the consumer, nor the companies, nor you as a family matters, because you are probably paying another crown or two per kWh.
In this case, I am convinced that the market is not working. If it doesn’t work, and France, Greece, Romania, Spain and Italy already agreed to it last November, the rules must be changed, because a dysfunctional market means total exclusion of any market economy in other areas as well, and it must be fixed quickly
What is Germany’s position, do we know it?
I do not know what will be the position of Germany. I suppose there were diplomatic consultations before the negotiations. But frankly, it is in Germany’s interest to make this step, because it will be much cheaper for Germany itself. It will be an important positive step for the whole of Europe.
And if Germany itself does not want to do this, I am convinced that it is possible to obtain support from other countries in Europe, so that a pan-European agreement can be reached in the historically short period of a few weeks. ¨
We can’t wait any longer. I understand that many people and companies are comfortable with this situation. Speculative money is beyond the imagination of the average citizen, here a billion kroner is a small amount.
That means, let’s go back to Earth and how the power is supposed to work. Above all, it should not operate in such a way as to impoverish consumers and exclude the European economy in quotation marks.