The Commission is proposing an emergency intervention in Europe’s energy markets to tackle recent dramatic price rises. The EU is confronted with the effects of a severe mismatch between energy demand and supply, due largely to the continued weaponisation by Russia of its energy resources. To ease the increased pressure this puts on European households and businesses, the Commission is now taking a next step in tackling this issue by proposing exceptional electricity demand reduction measures, which will help reduce the cost of electricity for consumers, and measures to redistribute the energy sector’s surplus revenues to final customers. This follows on from previously agreed measures on filling gas storage and reducing gas demand to prepare for the upcoming winter. The Commission is also continuing its work to improve liquidity for market operators, bring down the price of gas, and reform the electricity market design for the longer term.
The first response to tackle high prices is to reduce demand. This can impact electricity prices and achieve an overall calming effect on the market. To target the most expensive hours of electricity consumption, when gas-fired power generation has a significant impact on the price, the Commission proposes an obligation to reduce electricity consumption by at least 5% during selected peak price hours. Member States will be required to identify the 10% of hours with the highest expected price and reduce demand during those peak hours. The Commission also proposes that Member States aim to reduce overall electricity demand by at least 10% until 31 March 2023. They can choose the appropriate measures to achieve this demand reduction, which may include financial compensation. Reducing demand at peak times would lead to a reduction of gas consumption by 1.2bcm over the winter. Increasing energy efficiency is also a key part of meeting our climate commitments under the European Green Deal.
The Commission is also proposing a temporary revenue cap on ‘inframarginal’ electricity producers, namely technologies with lower costs, such as renewables, nuclear and lignite, which are providing electricity to the grid at a cost below the price level set by the more expensive ‘marginal’ producers. These inframarginal producers have been making exceptional revenues, with relatively stable operational costs, as expensive gas power plants have driven up the wholesale electricity price they receive. The Commission proposes to set the inframarginal revenue cap at €180 EUR/MWh. This will allow producers to cover their investment and operating costs without impairing investment in new capacities in line with our 2030 and 2050 energy and climate goals. Revenues above the cap will be collected by Member State governments and used to help energy consumers reduce their bills. Member States trading electricity are encouraged, in a spirit of solidarity, to conclude bilateral agreements to share part of the inframarginal revenues collected by the producing State for the benefit of end-users in the Member State with low electricity generation. Such agreements shall be concluded by 1 December 2022 where a Member State’s net imports of electricity from a neighbouring country are at least 100%.
Thirdly, the Commission is also proposing a temporary solidarity contribution on excess profits generated from activities in the oil, gas, coal and refinery sectors which are not covered by the inframarginal revenue cap. This time-limited contribution would maintain investment incentives for the green transition. It would be collected by Member States on 2022 profits which are above a 20% increase on the average profits of the previous three years. The revenues would be collected by Member States and redirected to energy consumers, in particular vulnerable households, hard-hit companies, and energy-intensive industries. Member States can also finance cross-border projects in line with the REPowerEU objectives or use part of the revenues for the common financing of measures protecting employment or promoting investments in renewables and energy efficiency.
In a further intervention in the electricity market rules, the Commission is also proposing to expand the Energy Prices Toolbox available to help consumers. The proposals would allow below cost regulated electricity prices for the first time, and expand regulated prices to also cover small and medium-sized enterprises.
As Commission President von der Leyen announced on Wednesday 7 September, the Commission will also continue to pursue other avenues to bring down prices for European consumers and industry, and ease pressure on the market. The Commission will deepen its discussion with Member States about the best ways to reduce gas prices, also analysing various ideas for price caps and enhancing the role of the EU Energy Platform in facilitating lower price agreements with suppliers through voluntary joint purchasing. The Commission will also keep working on tools to improve liquidity on the market for energy utilities, and review the Temporary State aid Crisis Framework to ensure that it continues to enable Member States to provide necessary and proportionate support to the economy while ensuring a level playing field. At the Extraordinary Energy Council on 9 September, Energy Ministers of Member States endorsed the Commission’s ongoing work in these areas.
The Commission has been tackling the issue of rising energy prices for the past year, and Member States have deployed many measures at national level which the Commission provided through the Energy Prices Toolbox adopted in October 2021 and expanded in Spring 2022 with the Communication on short-term market interventions and long-term improvements to the electricity market design and the REPowerEU Plan. The energy market situation has worsened considerably since Russia’s invasion of Ukraine and its further weaponisation of its energy resources to blackmail Europe, which exacerbated an already tight supply situation after the COVID-19 pandemic. The Commission has already proposed new minimum gas storage obligations and demand reduction targets to ease the balance between supply and demand in Europe, and Member States swiftly adopted these proposals before the summer.
As Russia has continued to manipulate gas supplies, cutting off deliveries to Europe for unjustified reasons, markets have become tighter and more nervous. Prices increased further over the summer months, which have also been marked by extreme weather conditions caused by climate change. In particular, droughts and extreme heat have had an impact on electricity generation by hydropower and nuclear, further reducing supply. That is why the Commission, in the form of a Council Regulation based on Article 122 of the Treaty, is now proposing an emergency intervention in the electricity market, with common European tools to tackle high prices and address imbalances in the system between suppliers and end-users of electricity, while preserving the overall functioning of the internal energy market and preventing security of supply risks.
President Ursula von der Leyen said: “Russian aggression and manipulation is affecting global and European energy markets, and we need to be resolute in our response. Today, the Commission is bringing further proposals to the table which Member States can swiftly adopt and implement, to ease the pressure on households and businesses. We continue to stand united in the face of Putin’s weaponisation of gas and ensure we minimise the impact of high gas prices on our electricity costs in these exceptional times.”
Executive Vice-President Frans Timmermans said: “These unprecedented measures are a necessary response to the energy supply shortages and high energy prices affecting Europe. Demand reduction is fundamental to the overall success of these measures: it lowers energy bills, ends Putin’s ability to weaponise his energy resources, reduces emissions and helps rebalance the energy market. A cap on outsize revenues will bring solidarity from energy companies with abnormally high profits towards their struggling customers. Above all, however, this crisis underlines that the era of cheap fossil fuels is over and that we need to accelerate the switch towards homegrown, renewable energy.”
Commissioner for Energy Kadri Simson said: “We are making an emergency intervention in the design of our power market today, capping revenues for lower cost electricity producers, and allowing exceptional measures on regulation of prices for businesses and households. This will enable Member States to raise and redirect revenues to those in need in this difficult time, without undermining the long-term functioning of the market”
Commissioner for Economy Paolo Gentiloni said: “Our proposal for a solidarity contribution from fossil-fuel industries will ensure that we tackle the current energy crisis in a spirit of fairness. In these extraordinarily difficult times for so many, fossil-fuel companies have been enjoying abnormally high rents. So it is essential that they pay their fair share to supporting vulnerable households and hard-hit sectors, as well as towards the mountain of investments before us in renewables and energy efficiency. Because in the face of Putin’s weaponisation of energy, we need a collective effort of solidarity in order to build a more secure and sustainable Europe.”
Renewable energy jobs rise by 700,000 in a year, to nearly 13 million
Worldwide employment in the renewable energy sector reached 12.7 million last year, a jump of 700,000 new jobs in just 12 months, despite the lingering effects of COVID-19 and the growing energy crisis, according to a new report published by the International Renewable Energy Agency (IRENA) in collaboration with the UN’s International Labour Organization (ILO).
Renewable Energy and Jobs: Annual Review 2022, identifies domestic market size as a major factor influencing job growth in renewables, along with labour and other costs.
Solar growing fastest
Solar energy was found to be the fastest-growing sector. In 2021 it provided 4.3 million jobs, more than a third of the current global workforce in renewable energy.
With rising concerns about climate change, COVID-19 recovery and supply chain disruption, countries are turning inwards to boost job creation at home, focusing on local supply chains.
The report describes how strong domestic markets are key to anchoring a drive toward clean energy industrialization. Developing renewable technology export capabilities is also dependent on this, it adds.
‘Just transition for all’
ILO Director-General, Guy Ryder, said that “beyond the numbers, there is a growing focus on the quality of jobs and the conditions of work in renewable energies, to ensure decent and productive employment.
“The increasing share of female employment suggests that dedicated policies and training can significantly enhance the participation of women in renewable energy occupations, inclusion and ultimately, achieve a just transition for all.”
Mr. Ryder encouraged governments, organized labour and business groups “to remain firmly committed to a sustainable energy transition, which is indispensable for the future of work.”
Resilient and reliable
IRENA’s Director-General, Francesco La Camera, said that in the face of numerous challenges, “renewable energy jobs remain resilient, and have been proven to be a reliable job creation engine. My advice to governments around the world is to pursue industrial policies that encourage the expansion of decent renewables jobs at home.
“Spurring a domestic value chain will not only create business opportunities and new jobs for people and local communities. It also bolsters supply chain reliability and contributes to more energy security overall.”
Joining the renewable revolution
The report shows that an increasing number of countries are creating jobs in the renewables sector – almost two-thirds of them in Asia.
China alone accounts for 42 per cent of the global total, according to the report, followed by the EU and Brazil with 10 per cent each, and the US and India with seven per cent each.
Southeast Asian countries are becoming major solar photovoltaic (PV) manufacturing hubs and biofuel producers, while China is the pre-eminent manufacturer and installer of solar PV panels and is creating a growing number of jobs in offshore wind.
India added more than 10 Gigawatts of solar PV, generating many installation jobs, but remains heavily dependent on imported panels, the report notes.
Europe now accounts for about 40 per cent of the world’s wind manufacturing output and is the most important exporter of wind power equipment; it is trying to reconstitute its solar PV manufacturing industry.
Africa’s role is still limited, but the report points out that there are growing job opportunities in decentralized renewables, while in the Americas, Mexico is the leading supplier of wind turbine blades.
Brazil remains the leading employer in biofuels but is also adding many jobs in wind and solar PV installations. The US is beginning to build a domestic industrial base for the budding offshore wind sector.
Guterres: ‘Global addiction to fossil fuels’ must end and a ‘renewables revolution’ jumpstarted
Achieving a just and equitable energy transition is “one of the biggest challenges facing our world,” UN Secretary-General António Guterres told the Global Compact Board meeting on Sunday.
Climate disasters and skyrocketing fuel prices have made the need to “end our global addiction to fossil fuels” crystal clear, he said, underscoring the importance of investing in renewables, building resilience, and scaling up adaptation.
“Had we invested massively in renewable energy in the past, we would not be in the middle of a climate emergency now”.
Renewals: ‘Only credible path’
Renewables are “the only credible path” to real energy security, stable power prices and sustainable employment opportunities, said the UN chief.
He also maintained that the share of renewables in global electricity generation must increase from nearly 30 per cent today to over 60 per cent in 2030 and 90 per cent in 2050.
“Leaders in business as well as government must stop thinking about renewables as a distant project of the future”, underscored the top UN official.
“Without renewables, there can be no future”.
Key energy priorities
The Secretary-General went on to outline his Five-Point Energy Plan to shift to renewables, beginning with treating the technologies as freely available “global public goods”.
“Identifying patents that can be made freely available – especially those relating to battery and storage capacity – are crucial for a rapid and fair energy transition,” he said.
Next, he highlighted the need to secure, increase, and diversify supply chains for renewable energy technologies, pointing out that supply chains for components and raw materials are “still concentrated in a handful of countries”.
Third, was to level the playing field for renewables.
“We have the technology, capacity, and funds,” said the UN chief, “but we urgently need to put policies and frameworks in place to incentivize investments and eliminate bottlenecks caused by red tape, permits and grid connections”.
Shift subsidies from fossil fuels to renewable energy was his fourth point, as he noted that each year, governments spend around half a trillion dollars to artificially lower the price of fossil fuels – “more than triple what renewables receive”.
“If we channel these resources and subsidies to renewables, we not only cut emissions; we also create more decent and green jobs,” he argued.
Financing the future
Mr. Guterres’ fifth and final point focused on the importance of tripling public and private investments in renewables to at least $4 trillion dollars a year.
“Upfront costs for solar and wind power account for 80 per cent of lifetime costs – meaning big investments today will reap even bigger rewards tomorrow,” he said.
However, this requires: financing to flow to those who need it most; adjusted risk frameworks and more flexibility to scale up renewable finance; and lowering financing costs for developing countries.
“The cost of capital for renewable energy projects in the developing world can be seven times higher than in the developed world,” flagged the UN chief, flagging that Africa attracts a mere two per cent of clean energy investments despite its vast renewable energy potential.
Walking the talk
According to Mr. Guterres, a just transition to a renewable energy future is everybody’s business, including the private sector to advance science-based targets and Just Transition plans, in partnership with labour organizations and civil society.
“Lip service won’t do. We need credible actions and accountability,” he underscored.
“The UN Global Compact is poised to help in this vital effort,” he spelled out, urging everyone to accelerate action across industries and regions “to jumpstart the renewables revolution”.
The Future of Energy Prices and How You Can Prepare Yourself
Even in the best of circumstances, it is difficult to forecast energy costs, and the current level of market instability makes it impossible to state whether energy prices will decrease this year. Despite the fact that prices have fluctuated throughout the year, the general trend has been upward.
Energy researchers and research firm Cornwall Insight have predicted that prices may continue to rise well into 2024.
The prices you face won’t change for the rest of the year and into 2023, though, thanks to the revelation that the energy price guarantee has capped prices for both households and businesses.
The only approach to maintain bill stability in a volatile market and guard off future price increases is to fix your energy prices.
Although it’s impossible to forecast if prices will go up further, they have increased dramatically over the past year, and anyone who had a fixed plan in September 2021 would have saved a lot of money on their energy costs.
It’s doubtful that you’ll have to switch until at least April of next year due to the implementation of the energy price guarantee in October. This is due to the fact that most firms’ energy costs will be limited till then.
When in doubt, think about performing a Business Energy Comparison of rates from various trusted energy providers in the UK.
It’s crucial to contact your provider right away to work out a payment plan if you are struggling to pay your company’s energy costs. In under 30 days of your missing payment, if you don’t resolve the issue with your supplier, they may take steps to cut off your energy supply.
The chief executive of Centrica, the holding firm of British Gas, has said there is “no reason” to anticipate gas prices to decline sometime soon, despite the fact that it is challenging to foresee exactly what will transpire in such a volatile energy market. He even predicted that there would be high petrol costs over the following 1.5–2 years.
The government seems to be dealing with tension by intervening and assisting customers by reducing the VAT or other fees that are not clearly connected to the wholesale energy prices.
Trade organizations have urged the government to provide financial assistance to company owners in the form of reduced energy-related VAT, a commercial energy price cap, as well as a Government Emergency Energy Grant for SMEs – basically, Covid-style aid for this most recent crisis.
Now that a price limitation on commercial energy has been established, there are few specifics available. Beginning on October 1, the price cap will be in effect for six months.
After three months, there’ll be a review to determine if the cap should be increased for particularly fragile sectors, such as the hotel industry.
Businesses must lock in current prices as quickly as possible if they want to protect themselves against out-of-contract charges and any likely new price increases.
It might be beneficial to consider how and when you use gas and electricity if you wish to reduce the cost of your company’s energy bills. Think about the following, then:
• Examine the times you heat your building.
• Turn off appliances,
• monitor the weather,
• and get a smart meter to cut costs
• Be aware of the price of water.
• When they’re not in use, turn off the lights, or install light sensors.
• Encourage your team to be energy conscious.
• Ensure your structure is airtight.
• Avoid using paper as much as possible.
• Obtain an energy audit.
But you must also maintain reality. If your energy prices increase, you could still notice it on your income statement even if you implement all practical energy-saving strategies and drastically reduce your consumption since you still need to consume a minimum amount of energy to keep your business operating.
There are different business energy tariffs available; if you select the incorrect one, your company will spend too much on energy supply.
Additionally, because you are bound to the terms of the contract when you sign a business energy agreement, you may be overpaying for up to 5 years.
Here’s why it absolutely is worthwhile to compare business gas and business electricity packages, even if you might be thinking if it’s really worth the effort.
If you haven’t yet changed your business energy supplier, your existing supplier will put you on an exorbitant “out of contract rates” arrangement. These prices may be up to double the cost of contracted rates and even more so in the present market.
When switching, you should be aware that the prices you receive will depend on a variety of factors, including how much energy you use, where your business is located, and whether or not your company is financially stable.
If your company has a low credit score, you may wind up paying higher prices since your company is seen to be riskier.
Additionally, it’s important to be aware that corporate energy providers do not provide dual fuel contracts, although if you subscribe to a gas and electricity arrangement from the same provider, those will still be two different energy contracts.
One of the two situations listed below will occur to your energy contract if your company relocates:
• It will be moved to your new place of business.
• It will be canceled, and you’ll have to establish a new agreement at your new location.
It’s uncommon to be given the option to cancel a commercial energy contract early after signing one.
This is so that your supplier won’t lose money if you terminate the contract before the predetermined end date since it will purchase the appropriate amount of energy to last you the whole period of the contract.
Moving your company is a rare opportunity to terminate your existing business energy contract slightly earlier and transfer to a better price, but you must carefully consider your alternatives before making the transition.
Your provider will handle the transfer of your current energy contract to your new location, ensuring no problems arise and that you are only charged for the period beginning on the day you relocate into the new location.
If you decide to transition to a new agreement with a different provider, you will need to make arrangements for the settlement of your last commercial energy bill or for any refunds you may be owed if your account has been positive.
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