Statement by President von der Leyen on a new package of measures to address high energy prices and ensure security of supply

Russia's war against Ukraine has triggered severe knock-on effects. One of these knock-on effects that we see is an unprecedented energy crisis. As you all know, we have been working very hard in the last months against the fallout on the energy markets. And we have made progress, we are cutting demand; we have seen now that we have been saving gas – 15% of the overall demand – in September. We have been filling our gas storages – we are now at 92%. We have been intensively diversifying away from Russia towards reliable suppliers. And one figure shows that by now, the Russian share of imported pipeline gas is down to 9%, so more or less two-thirds of the Russian supply has been cut. And as you know, we have made possible for the Member States to channel windfall profits of energy companies to vulnerable households and companies.

Thanks to this common action, we have reached our first main goal: That was to be better prepared to face this winter. On this basis, we can now take further steps towards a real Energy Union. Two weeks ago, before the Informal meeting of Heads of State or Government, I wrote a letter to the Leaders outlining the roadmap on the energy field, that we have. This roadmap includes elements that we have already put in motion. For example, the fact that we have said that we will negotiate a price corridor with our reliable suppliers, like for example Norway. But we also have other issues in this roadmap that take more time to mature and have been intensively discussed in the last weeks in various Energy Councils or summits. As a result, the College could adopt today another set of proposals. Commissioner Simson and Commissioner McGuinness will outline these exceptional and temporary measures in a moment.

Let me focus on the overall logic. We know that we are strong when we act together. Therefore, the first emphasis is that we make joint purchasing in this proposal today operational. We know that Europe's energy demand is very large. So it is logical that instead of outbidding each other, the Member States and the energy companies should leverage their joint purchasing power. For that, we propose today legal tools for pooling energy demand at European level. What we are doing is that we are also enabling energy companies to set up a ‘gas purchasing consortium' so that they are able to purchase gas together. And in that, we include one mandatory, one binding element: That is that we say that the aggregation of demand will be mandatory for at least 15% of the volumes that are needed to fill the storages.

Why that? Because we have seen by experience this year that it is the last 10-20%, when we fill the storages, that are the most expensive. These are typically volumes that are not secured by long-term contracts. This year, we saw our companies outbidding each other on these volumes in the spot market and thus themselves driving up prices. Therefore, we want to be better prepared for the next filling season; we want to join forces and pool this European purchasing power. Very important in that is that we will of course also involve our close neighbours like the Western Balkans or the Eastern Partnership. The second element is saving. We have been speaking a lot about it. As I said, a lot has been done in the  energy savings and energy efficiency. And it is a good sign that we achieved in September a reduction of 15% of demand.

The third element is solidarity – sharing. This is crucial to be prepared in case of a full gas and electricity disruption. As you know, we have the European Security of Supply Regulation. This is in force since five years already. It requires Member States to conclude solidarity agreements with their neighbours in a certain region. Potentially, we should have 40 of these solidarity agreements. We only have 6. This is not enough in a crisis of this scope. So with this proposal today, under Article 122, we are proposing default rules on solidarity that will apply in case of emergency, as long as there are no bilateral solidarity agreements in place. We all know that European solidarity is the very best insurance policy Member States can have in a crisis. But there is also a second element: The better we are organised, the better we can make use of all the work of the last months on interconnectors, on infrastructure, on LNG terminals or on the storage. It is also a matter of being well organised among us 27. These were the first three points on pooling, sharing and saving.

Let me now look at a fourth element that is about prices. We need to tame the volatility and the extreme price hikes on the main European gas market – that is the so-called TTF. The TTF benchmark has mainly been designed for pipeline gas. But we all know that this market has dramatically changed. It has changed from pipeline initially to much more LNG by now. So the TTF that we see today does no longer reflect the true market situation. We will therefore develop a complementary LNG-specific benchmark for the next filling season. We have to bridge the time in between – between TTF now and the complementary benchmark we will have for the next filling season. Therefore, we are putting in place a mechanism to limit excessive gas prices if needed. Here, you might perhaps recall that we had in March a Communication where we were already proposing such a capping mechanism. But at that time, the proposal was not mature. We could not find majorities. But we have had a lot of discussions on that over the past months. So there is an increased understanding now between the Member States. And our approach is much more widely shared.

I am therefore hopeful that we can now progress on these very critical issues. Here, we are taking a two-step approach: Today, we are setting out a number of principles for this ‘flexible or dynamic capping mechanism'. It should be flexible enough to ensure security of supply, for example. It should be high enough so that the market is functioning and the gas is flowing, and it should be wide enough so that it is also covering the other benchmarks we have in the European Union. As soon as the Council agrees on these principles, we will flesh it out, we will come with all the details in a non-trivial approach to make it operational. Then, there is a lot on an intra-day price spike collar. But Mairead, you will detail this out. Very important, very technical. So we ask for your expertise.

Finally, let me touch upon two important topics that are not in the Article 122. All I have said right now is in the Article 122, the two other topics are in the Communication. The first one is how to limit the impact of gas prices on the electricity price. You know this model, it has been introduced in Spain and Portugal, where it has reduced electricity prices. We believe that it merits to be considered for introduction at the EU level. We are right now looking into the available data to find responses to one or two questions that are still open. But, as I said, it really merits to look deep into it and to see how we can make it operational on the EU level.

My very last point is about investments. It is not so much the actual energy situation but it is referring to the knock-on effects or impact on our economy because of the high energy prices. You know that we have introduced REPowerEU. It is perhaps important to keep in mind that, at the beginning of the war, when Putin started to weaponise gas, and this tactic was obvious to us, we decided to completely phase out Russian gas. At that time, when we had these discussions, eight months, you might remember that we were saying that it will take us years, until 2027 or 2030, to manage that. Well, it went much, much faster – as you could see from the figures I was just presenting. So this process has been massively accelerated. If the current trend, that we see, persists – diversifying away from Russian gas –, and if we keep up our action – also the saving action –, we will have received at least 65 billion cubic metres of gas from other suppliers than Russia and we will have saved 50 billion cubic metres of gas until the end of the year. That is quite a sum. And we see that this year we have a record deployment and delivery in the renewable energies. So taking all this into account, this acceleration in the transition that we see, I think we also need the same acceleration in our investment in cross-border infrastructure, and in energy efficiency and in renewables.

And here, REPowerEU comes into play. We have proposed it in May. Since then, things have changed dramatically, as I have just described. We will therefore now carry out a needs assessment for REPowerEU. We will assess what is necessary to boost this clean energy transition and how we can avoid fragmentation in the Single Market so that these investments in the clean energy transition are available in the whole European Union. This will then form the basis for Commission proposals to enhance the firepower of REPowerEU. Tomorrow, I will present these proposals to the European Parliament and then, on Thursday and Friday, to the Leaders.