A proposal for a limit on wholesale gas prices developed by the European Commission at the insistence of a group of member states would not apply to Irish purchases, The Irish Times understands.
The proposal laid out to the member states this week involves setting a fixed maximum price on month-ahead contracts for gas on the Dutch TTF trading point for natural gas, which is used by many EU countries to buy pipeline gas and liquefied natural gas supplies.
In contrast, Irish gas supplies are purchased in Britain’s NBP (national balancing point) exchange, putting Ireland outside the system.
Ireland is among the member states that are cautious on the idea of imposing a cap on gas prices, because of fears that it could dissuade suppliers from selling to EU buyers and inadvertently cause shortages.
The European Commission has also been cautious in bringing forward a proposal. In a paper laying out how the cap could be imposed this week, commission officials warned that while the measure could limit price spikes and deter speculation, it could also cause “security of supply issues”.
Gas sellers could potentially hold back supplies until the price ceiling is no longer in effect, while, if the price ceiling is not higher than global prices “it could have an impact in attracting cargoes into the EU”, it warns.
The shutdown in supplies of Russian pipeline gas to the EU has contributed to a tight global market for supplies of alternative liquefied natural gas, which is transported by ship, and there are concerns that the EU may need to compete with Chinese demand to refill its gas reserves ahead of next winter.
Although Irish gas purchases would not be directly affected, and Ireland’s supply is relatively secure compared to other EU countries as it draws on the Corrib, UK, and Norwegian supplies, there could nevertheless be knock-on effects if overall supplies are short in Europe.
The plans laid out by the commission would be “activated only if prices reach exceptional levels”, according to a paper laying out how the mechanism could work. The level at which to fix the price cap has not yet been agreed.
The proposal falls short of the hopes of many of the 15 member states that have been most determined in pushing for a cap on gas prices, as the EU races to find a consensus on an issue that has divided the bloc for months ahead of an extraordinary meeting of energy ministers next week.
So far, Ireland’s gas supplies have proved more resilient than elsewhere in Europe and wholesale prices paid have been below those of the Continent, officials say.
A previously-agreed plan to siphon off revenues of some energy suppliers when wholesale prices are above a certain rate and impose a levy on the extraordinary profits of fossil fuel producers has not yet been enacted.
Wholesale prices of electricity in Ireland are below the level at which the revenue capture kicks in, at €180 per megawatt hour. Revenues will only begin to be accrued by the Government if prices exceed that level.
EU countries have also agreed to reduce their demand for gas as part of a plan to avoid shortages this winter.