Regulation 2022/1854 - Emergency intervention to address high energy prices - Main contents

EN

Official Journal of the European Union

LI 261/1

Very high prices in electricity markets have been observed since September 2021. As set out by the EU Agency for the Cooperation of Energy Regulators (ACER) established by Regulation (EU) 2019/942 of the European Parliament and of the Council (1) in its final assessment of the Union wholesale electricity market design in April 2022, this is mainly a consequence of the high price of gas, which is used as an input to generate electricity. Natural gas-fired power plants are often needed to satisfy the demand for electricity when the demand is at its highest during the day or when the volumes of electricity generated from other technologies such as nuclear, hydro or variable renewable energy sources do not suffice to cover demand. The escalation of Russia’s war of aggression against Ukraine, a Contracting Party to the Energy Community Treaty (2), since February 2022 has led to gas supplies declining markedly. Russia’s war of aggression against Ukraine has also caused uncertainty regarding the supply of other commodities, such as hard coal and crude petroleum, used by power-generating installations. This has resulted in substantial additional increases in, and volatility of, the price of electricity.

The recent substantially lower levels of gas delivery and increased disruptions of gas supply from Russia point to a significant risk that a complete halt of Russian gas supplies may happen in the near future. To increase the Union’s security of the energy supply, the Council adopted Regulation (EU) 2022/1369 (3) that provides for a voluntary reduction of natural gas demand by at least 15 % from 1 August 2022 to 31 March 2023 and grants the Council the possibility to declare a Union alert on the security of the gas supply, triggering a mandatory Union-wide gas demand reduction.

In parallel, the exceptionally high temperatures observed during the summer of 2022 have pushed up demand for electricity for cooling, adding pressure on electricity generation while, at the same time, electricity generation from certain technologies has been significantly below historical levels due to technical and weather-dependant circumstances. This is due mainly to an exceptional drought which led to: (i) a shortfall in the production of electricity by nuclear power plants in different Member States caused by the lack of available cooling water; (ii) scarce hydropower generation; and (iii) low water levels in major rivers which have adversely affected the transport of commodities used as input fuel for the generation of electricity. This unprecedented situation means that the volumes of electricity generated from natural gas-fired power plants have stayed persistently high, contributing to exceptionally and abnormally high wholesale electricity prices. Despite the reduced availability of generation capacities in some Member States, electricity exchanges between Member States have helped to avoid security of supply incidents and contributed to mitigating price volatility on Union markets, thereby enhancing each Member State’s resilience to price shocks.

The price surge in wholesale electricity markets has led to sharp increases in electricity retail prices, which are expected to continue ahead of the next heating season gradually trickling down to most consumer contracts. The sharp increase in gas prices and the resulting demand for alternative fuels has also led to an increase of other commodity prices such as those of crude...