You are not logged in!

You are not logged in!

You are not logged in!

Freezing energy prices, a good idea?  - Economic policy

Freezing energy prices, a good idea? – Economic policy

Given the current surge in energy prices, a price freeze could be considered by the Belgian government. However, such a measure is not so easy to implement. Explanations.

Freezing energy prices could be a solution to prevent household bills from continuing to soar this winter. Currently, the price of gas is hovering around 200 euros/MWh, driving up electricity prices with it.

Freezing energy prices could be a solution to prevent household bills from continuing to soar this winter. Currently, the price of gas is hovering around 200 euros/MWh, driving up electricity prices with it. The price freeze can take two forms, details the newspaper De Standaard. The first is that implemented by Spain and Portugal. It is a question of controlling the price for the consumer. Suppliers, who have to buy their gas on the world market, are supported by subsidies, which are also paid by the consumer. A second solution would be to simply freeze the maximum price we are willing to pay for gas, whether that either for gas imports from Russia or other countries. Freezing gas and electricity prices – a measure already taken in 2012 under the Di Rupo government to fight against high inflation – is not easy to put in place in Belgium for various reasons. The first, and the most restrictive, is the following: for a country, to freeze, alone, the prices of energy goes against European laws. Portugal and Spain, however, succeeded in freezing their energy tariffs last May for a period of 12 months. This agreement actually stems from a European mechanism torn off after long negotiations. This mechanism recognizes the “Iberian exception” of the two countries in terms of energy and allows them to limit gas prices in their energy mix, explains the TF1 site. Concretely, it authorizes Madrid and Lisbon to derogate from the European tariff system for at least one year, by capping their gas prices at an average of 50 euros per kilowatt/hour (kWh). If this “special treatment” was decided, it is because of the “few interconnections” of the energy mix of the two countries, which has a large share of renewable energies, with the European market, justified Ursula von der Leyen , President of the European Commission. Spain and Portugal cannot therefore disrupt the proper functioning of the European market. It should be noted that Italy and Greece, which also wanted to change the rules of the energy market and set a maximum price for gas, did not win their case. Belgium, on the other hand, is one countries with the best interconnections. It is a real gas hub in Europe. A similar measure would distort the energy market. The result of the price freeze decided in 2012 has also proved to be questionable, recalls De Standaard. Europe criticized our country and when the measure came to an end, prices immediately rose again. The energy regulator, the Creg, is therefore not in favor of a new price freeze experiment in our country. This measure would also pose a considerable economic risk to suppliers, with the consequence of the bankruptcy of some of them, the regulator warned at the end of last year. As a result, competition in the market is reduced, which ultimately leads to higher prices, explains De Standaard. The situation in Belgium is also different from that of our French neighbours. Belgium has a fully liberalized market, continues the Flemish daily. It therefore does not have an energy producer with a monopoly, as is the case with the public company EDF. France uses this dominant position to impose a maximum tariff, which is not possible here. This pricing policy also has its negative effects. EDF sank into the red. In the short term, French electricity consumers may be better off thanks to regulation, but in the longer term they may have to foot the bill, if only in the form of the taxes needed to keep EDF flots.Since a price freeze would disrupt the single market, the solution can only be found at European level following lengthy negotiations, argues De Standaard. The ideal solution put forward: a concerted group purchase carried out by all the countries of the EU. Damien Ernst, energy expert and professor at the University of Liège who speaks in particular in this week’s Trends Tendances, for its part, a concrete measure that can be taken immediately to reduce the bill, on the model of Spain and Portugal. He explains it in detail in the Last Hour: “The first mechanism to put in place is to change the rules of the Day-Ahead market. In summary, 40% of electricity is traded on this market, and it is he who decides the prices. The problem is that the prices are calculated on the basis of the most expensive energy resource for producing electricity: gas. Today, we are more than €600 per megawatt-hour for electricity produced using gas, whereas we are at around a hundred euros for wind and nuclear power, at the very large maximum.The big producers are therefore busy making phenomenal excess profits on certain products, he explains. The expert continues: “Spain and Portugal have already successfully regulated this day-ahead market, which means that prices there are three times cheaper than in the rest of Europe. And if the producers find themselves at a loss on this market, it is the State which intervenes via subsidies. But the subsidies represent only a fraction of the money earned by consumers.” According to him, doing the same thing in Belgium would save an average of 1,000 euros per year for a household. “These measures in Spain and Portugal have been approved by Europe. Why not do it also in the rest of Europe? It’s time to move or to do it alone, if necessary “, pleads Damien Ernst.

Leave a Comment

Your email address will not be published.