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The European Union will launch a “profound and comprehensive reform” of the electricity market, European Commission President Ursula von der Leyen said Wednesday.
In his annual State of the Union address, delivered at the European Parliament building in the French city of Strasbourg, von der Leyen said the market was designed on the principle of order of merit and is not fit for purpose. .
“Consumers should benefit from low-cost renewables,” he said, “So we need to decouple the dominance of gas over electricity prices.”
Von der Leyen also said that there has been a shift from pipeline gas to more use of liquefied natural gas, but the benchmark used in the gas market, TTF, has not adapted.
He said the commission will work on developing a more representative trading benchmark that reflects this change and will also ease liquidity pressures on energy suppliers by changing the rules on collateral and taking steps to limit intraday price volatility.
An energy crisis in both supply and prices in Europe culminated earlier this month when Russia indefinitely cut off gas flows to Europe via the main Nord Stream 1 pipeline.
EU energy ministers met on Friday to discuss a five-point plan that includes a cap for Russian gas, a tax on the profits of fossil fuel companies, a cap on the revenues of renewable and nuclear companies, a mandatory target to reduce peak hour energy consumption by 5% and emergency credit lines for power companies.
Russian President Vladimir Putin has threatened to ignore existing contracts and completely shut down energy supplies to Europe following the announcement of the plan.
Addressing the taxation and extraordinary revenue cap plans, von der Leyen said that while profits were not necessarily a bad thing, “it is wrong to receive record extraordinary revenue and profits by benefiting from the war and on the shoulders of our consumers.”
“In these times, profits must be shared and channeled to those who need them most.”
He said millions of households and businesses across the European Union were struggling with rising prices and feared for the future.
The tax on fossil fuel profits would provide 140 billion euros (139.8 billion dollars) to be shared among member states to support their energy bills, he added.
Von der Leyen said a priority for the blockade must be to end its dependence on Russian gas, with imports from the country already down from 40% last year to 9% today.
“We decided to join storage, now we’re at 84%, exceeding our goals,” he said.
But, he continued: “This will not be enough. We need to diversify from Russia to reliable suppliers such as the United States, Norway, Algeria and others”, as well as investing more in renewable energy and LNG terminals.
“Putin will fail”
Ukrainian first lady Olena Zelenska was present in Strasbourg as a guest of honor and parliamentarians received a standing ovation.
Zelenska tweeted that he wanted to “personally thank” von der Leyen for his contribution to Ukraine’s application for EU membership.
Von der Leyen, who delivered the speech wearing the Ukrainian flag colors yellow and blue, made passionate statements about the war, saying Ukraine faced the “face of evil” following the February 24 Russian invasion.
“A lot is at stake, not only for Ukraine, but for all of Europe and the world in general,” she said, paying tribute to the victims of the war, which she also believed was an attack on the economy, on the energy, values and the future of Europe.
“It is about autocracy against democracy and I stand here with the conviction that with the necessary courage and solidarity Putin will fail and Ukraine and Europe will prevail.”
“Today courage has a name and that name is Ukraine. Courage has a face and that face is the face of Ukrainian men and women who are resisting Russia’s aggression.”
Forces in Kiev have claimed thousands of kilometers of land occupied by Russia in recent days, sparking fears about Moscow’s next move. Russia launched intense bombings in the Kharkiv region on Saturday.
Von der Leyen also said that the sanctions against Russia are “here to stay” and it was “the time for determination and not for pacification”.
Three-quarters of Russia’s banking sector had been cut off from international markets, nearly 1,000 international companies had left the country, its automobile production fell by 75% from last year, and its “industry is in tatters” with its appliances that disassemble the military for parts due to a shortage of semiconductors, he noted.
He added that he wants to extend “seamless access” to the EU single market to Ukraine and will travel to Kiev on Wednesday to discuss it with Ukrainian President Volodymyr Zelenskyy.