The EU has adopted new emergency interventions in the energy sector to accelerate renewable energy and curb gas prices
Faster permit-granting processes for the installation of renewable energy and a curb on the price of gas on the TTF gas exchange are some of the measures adopted by the EU ministers of energy at the extraordinary Energy Council meeting on 19 December 2022.
The top item on the agenda at the Energy Council meeting on 19 December was to reach a compromise on a gas price cap (a price correction mechanism). The Council managed to reach agreement, and with that item resolved, the Council was able to also formally adopt two new emergency regulations; a regulation designed to accelerate the deployment of renewable energy and a regulation on joint purchasing of gas in the EU.
The three new emergency regulations contain temporary, extraordinary interventions in the energy market the object of which is to manage the high energy prices and safeguard the reliability of supply in the EU. The regulations have all been processed according to Article 122(1) of the TFEU under which the Council may with a qualified majority adopt measures bypassing the European Parliament in emergency situations in the energy area.
The regulations lay down rules which will apply directly and immediately in Danish law once the regulations enter into force. It may, however, be needed to supplement the regulations with national rules in the specific implementation of the regulations.
In the outline below, we will give you an overview of the most important elements of the new emergency regulations.
Faster permit-granting processes for renewable energy power plants
Council Regulation (EU) 2022/2577 laying down a framework to accelerate the deployment of renewable energy
The regulation lays down temporary rules designed to accelerate some of the permit-granting processes applicable to renewable energy projects.
The intention is for the temporary regulation to cover the time required for adoption and implementation of the amendment to the Renewable Energy II Directive currently being negotiated in the EU. The amendment to the Renewable Energy II Directive will also lay down multiple initiatives to ensure faster deployment of renewable energy, including short deadlines for the permit-granting processes and designation of so-called “go-to areas” for the installation of renewable energy projects.
Solar energy equipment
A specific derogation from the requirement to carry out environmental impact assessments (EIA screening and/or EIA) will apply to the installation of solar energy equipment on artificial structures. The maximum deadline for the permit-granting process is three months.
The permit-granting process for repowering of renewable energy plants resulting in an increase in capacity must not exceed six months including environmental impact assessments where required.
Where an environmental impact assessment of the repowering project is required, the assessment must be limited to the potential significant impacts stemming from the change or extension compared to the original project. Repowering of solar installations are completely exempt from the requirement for environmental impact assessments if the project does not entail the use of additional space and applies with the applicable environmental mitigation measures established for the original installation.
The permit-granting process for the installation of heat pumps below 50 MW electrical capacity must not exceed one month. For ground source heat pumps, the permit-granting process must not exceed three months. Member States may exclude certain areas or structures due to reasons of cultural or historical heritage protection, or for reasons related to national defence interests or safety.
Renewable energy projects may only be exempted from environmental impact assessments in special designated areas
Renewable energy projects, energy storage projects and electricity grid projects which are necessary to integrate renewable energy into the electricity system may be exempted from the environmental impact assessments provided that the project is located in a dedicated renewable or grid area for a related grid infrastructure which is necessary to integrate renewable energy into the electricity system. The exemption option therefore only applies where Member States have designated such areas, and the areas have been the object of a strategic environmental assessment.
Higher weighting of renewable energy projects over environmental considerations
Planning, establishment and operation of renewable energy projects, their connection to the grid, the related grid and storage assets must be presumed as being in the overriding public interest and serving public health and safety. This presumption must apply when balancing interests in the individual case in the event of derogation from area and species protection in the nature protection directives and protection and objectives according to the Water Framework Directive.
Renewable energy projects only have priority over the species protection if and to the extent that appropriate species conservation measures contributing to a favourable conservation status for the species are undertaken and sufficient financial resources as well as areas are made available for that purpose.
However, the regulation makes it possible for Member States to restrict the application of the presumption rule on overriding public interest to certain areas, to certain technologies or to projects with specific technical characteristics where this is in accordance with the priorities set in their integrated national energy and climate plans.
Period of application and entry into force
The regulation will apply for 18 months from its entry into force (the day following that of its publication in the Official Journal of the European Union). The Commission will no later than on 31 December 2023 assess whether the period of validity is to be extended.
Member States may also apply the Regulation to ongoing permit-granting processes provided that this shortens the permit-granting process and that pre-existing third party legal rights are preserved.
It must be expected that the Regulation will require amendments to Danish environmental legislation as well as to the rules on permit-granting processes for renewable energy plants. It must also be expected that considerable resources are to be allocated at the public authorities if they are to be able to meet the requirements and deadlines for the authorities’ processing of renewable energy projects without running the risk of faulty processing.
Joint purchasing of gas
Council Regulation (EU) 2022/2576 of 19 December 2022 enhancing solidarity through better coordination of gas purchases, reliable price benchmarks and exchanges of gas across borders
The regulation makes it possible for Member States and the energy companies to make joint purchases of gas in the global markets. With joint purchases of gas, the EU will be in a stronger position, and the price of the gas purchases is expected to be lower.
The purchasing mechanism consists of two elements:
- Aggregating demand for gas which natural gas undertakings and undertakings consuming gas report to a service provider contracted by the Commission, and
- Coordinated purchases of gas via the EU Purchase Platform.
The process for joint purchasing of gas will be coordinated by an established ad hoc Steering Board consisting of representatives from the Commission and the Member States. In January 2023, the Commission will convene the first official Steering Board meeting.
Other measures introduced with the Regulation
In addition to the above, the Regulation contains rules on solidarity between the Member States in emergency situations. Rules e.g. apply governing situations where a Member State does not have sufficiently high volumes of gas to supply gas customers, who according to the Regulation concerning measures to safeguard security of gas supply, are defined as “solidarity protected customers”, which are e.g. private households and critical infrastructure. The solidarity rules supplement existing rules in the Regulation concerning measures to safeguard security of gas supply.
The Regulation furthermore imposes on ACER the obligation to establish a joint LNG price index (benchmark) by 31 March 2023 at the latest and subsequently prepare daily price lists.
Gas price break
Council Regulation (EU) 2022/2578 of 22 December 2022 establishing a market correction mechanism to protect Union citizens and the economy against excessively high prices
Industry players and multiple Member States have expressed concerns about the adoption of a joint gas price cap in the EU. They are concerned that a gas price cap will have an adverse effect on the reliability of supply in the EU, including a stop on LNG imports to the EU, and result in a risk of increasing the gas consumption and also harm the financial stability.
In November 2022, the Commission suggested a price correction mechanism with a price cap of EUR 275/MWh. Multiple Member States criticised the price cap for being so high that it could not be expected to ever apply. Now, the Member States have agreed on a price correction mechanism with a price cap of EUR 180/MWh.
Activation of the price correction mechanism
The price correction mechanism is based on a two-step model covering the price level at TTF and the global LNG price development. According to the Regulation, the price correction mechanism will be activated automatically when the following events occur:
- When the front-month TTF derivative settlement price exceeds EUR 180/MWh for three working days, and
- is EUR 35 higher than the reference price of LNG in the global markets during the same three working days.
When the conditions for activation have been met, ACER must immediately publish a notice to this effect on its website. As from the day after the publication, market operators must not accept orders above the dynamic bidding limit announced by ACER, and TTF derivatives market participants must not submit such orders.
Period of application and entry into force
The Regulation enters into force on 1 February 2023 and applies for one year. Activation of the price correction mechanism (Article 4 of the Regulation) applies from 15 February 2023.
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