European Commission - Directorate General for Energy

10/14/2021 | News release | Archived content

Speech by President von der Leyen at the European Parliament Plenary on the preparation of the European Council meeting of 21-22 October 2021

Dear Vice-President,

Honourable Members,

We will be discussing many important topics at tomorrow's European Council, from booster shots against COVID-19 to cybersecurity, to Belarus and Afghanistan. But today, I would like to focus on one that is particularly important for our citizens: energy prices.

Let me begin with two simple facts. First fact: gas prices are cyclical, and they are set by global markets. But because of the price rise in gas, many families are struggling to make ends meet and businesses are at risk of closing. Second fact: solar energy is today ten times cheaper to produce than ten years ago. And even wind power - which is, by definition, more volatile - is today 50% cheaper than a decade ago. These two facts show us that the transition to clean energy is not just vital for our planet - it is also crucial for our economy and for our resilience to energy price shocks.

What are the causes of the current spike? The global economy is recovering from the pandemic and energy demand is rising worldwide. An unusually long and cold winter was followed by an unusually hot and dry summer in the entire Northern hemisphere. The whole world is affected - irrespective of countries' energy and climate policies or electricity market design. In fact, prices in Asia are even higher than here in Europe.

Yet, there is something specific to the European situation. While Gazprom has honoured its long-term contracts with us, it did not respond to higher demand as it did in previous years. Europe today is too reliant on gas and too dependent on gas imports. We import 90% of the gas we consume. And this makes us vulnerable. The answer has to do with diversifying our suppliers. But also keeping the role of natural gas as transitional fuel and, crucially, with speeding up the transition to clean energy. The European Green Deal is in the mid and long term a pillar of European energy sovereignty in the 21st century. But of course, our citizens also rightly expect quick responses.

Let me turn to the measures we are deploying to address the situation in the short term. Our priority is to give relief to vulnerable families and businesses. Some measures can be taken very swiftly, under current EU rules. This includes relief for businesses - especially SMEs - through state aid, targeted support to consumers, and cuts to energy taxes and levies. Just to remind ourselves: on average, one third of the wholesale energy price is set by the market; one third depends on infrastructure charges; and one third on national and regional taxes. This is where Member States can act very quickly. And 20 are already acting.

In the medium and long-term, the Commission will take action in five crucial areas. First, we must end speculation on the energy markets. This is why we are increasing our monitoring of the gas and carbon markets. And we have asked the European Securities and Markets Authority to examine trading behaviour in emission allowances. Second, we will assess the functioning of the electricity market. The design of our electricity market has given us good results.

Yet right now, gas prices are driving up all other prices. We have therefore asked the Agency for the Cooperation of Energy Regulators, ACER, to produce, by November, a preliminary assessment of the system in the light of current experience. It will then formulate recommendations on how to better address extreme price volatility.

Third, we are reaching out to foreign suppliers of gas. Norway's Equinor has already announced increased supplies. And, in early 2022, we will come forward with an international energy engagement strategy, to also help Member States coordinate their global outreach.

Fourth, we will address the issue of gas storage. We currently have no European framework on strategic reserves for gas, as we have for oil. We could improve our preparedness by organising regular stress tests of our storage and response capacity. We will also explore the potential for joint gas purchasing, possibly on a voluntary basis. We could create considerable economies of scale by joining forces at European level. Here, too, a joint European approach could have a positive leverage effect.

Finally, this crisis has shown that we need to accelerate investment in renewable energy. Every kilowatt of electricity produced from renewable sources is not only an insurance against rising energy prices. It also helps us to reduce our dependency on imports, making both our societies and our economies more resilient. We need to do more to invest in renewables and in an energy system with adequate storage capacity, cross-border interconnections, sufficient base-load and flexible power generation.

And this is exactly what we are doing with NextGenerationEU, our recovery programme. Under the national plans submitted so far, 36 billion euros will be spent on clean energy, from clean hydrogen to offshore wind.

What we need moving forward, is true European teamwork. One key challenge here concerns permits. On average, it takes between 6 and 7 years for a wind plant to be authorised. This has to change. The Commission will table guidance on permitting next year, as part of the Renewable Energy Directive. Cooperation with the European Parliament and the Council will be essential.

Honourable Members,

Science has been telling us for years that we must accelerate the transition towards a carbon-neutral economy. Now, the economy is adding another reason to do so. The upcoming COP26 in Glasgow will be the moment for the whole world to speed up action. Because the world is not yet on track to match our commitments under the Paris Agreement. So much more needs to be done to prevent global temperatures from rising more than 1.5 degrees over pre-industrial levels. The European Union will bring to Glasgow the highest level of ambition. We do it for Europe. We do it for our planet. And we do it for all future generations.