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EC to limit revenues of electricity producers

The European Commission is proposing to limit the income of non-gas electricity producers, who have recently made large profits.

We have already written a lot about the current energy situation. Recently, we have seen steps such as the proposal to cap the price of Russian oil by the G7 countries. There is also the capping of Russian gas prices, which is causing great debate among countries, and Hungary, for example, is strongly opposed to this move.

The President of the European Commission, Ursula von der Leyen, has commented on the new step that is being prepared which will affect electricity producers. The entire proposal is expected to bring up to €142 billion to EU member states.

So what steps should be taken?

One important step should be to reduce demand. After all, if less electricity is used, savings will be made. In peak hours, this should reduce consumption by at least 5%.

Another step is a revenue cap for low-cost power generation. The European Commission believes that the large profits of energy companies should be shared and directed to those who need them most. This step should bring in up to €117 billion.

Read also: Inflation analysis and its implications for the markets

Oil, gas and refining companies should also make a temporary solidarity contribution from their profits, which should raise an additional €25 billion.

Russia’s manipulation of gas supplies is a major contributor to the current situation

Von der Leyen reiterated that Russian manipulation of gas supplies is a major contributor to the unprecedented price rises. By reducing the volume of gas supplied or stopping supplies altogether, Russia appears to be reacting to the attitude of European countries to its aggression against neighbouring Ukraine and their clear support for Kiev’s resistance. Moscow usually justifies repeated supply cuts on the grounds of technical problems or force majeure.

The commission chief said.

“They would rather burn the gas than supplying it … This market doesn’t work anymore.”

It will take a change in the whole system

The European Union must seek a “paradigm shift” in the current energy crisis, not just a quick fix for pressing problems, Ursula von der Leyen has said. She highlighted the potential of hydrogen and announced the creation of a new “bank” to help build a market for the resource. She also reiterated the need for a major reform of the electricity market.

She then commented on the topic by stating.

“Hydrogen can once again deal the cards in Europe. We need to move our hydrogen economy from something marginal to large scale.”

So it looks like the whole thing and changes are afoot in Europe. However, it remains to be seen how the situation will develop in the future and how effective the above steps will become.

Bruno is an Investment enthusiast with several years of experience in the industry. He enjoys following the latest news and technology trends...

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