Vouchers and bill deferrals: Europe throws emergency lifeline to consumers and businesses as energy costs soar

With Europe’s energy prices going through the roof, the European Commission has unveiled a package of emergency measures, including vouchers or partial bill payments for “energy-poor” consumers and aid for companies and industries.

If the measures are implemented by national governments, vulnerable households can expect to see temporary tax cuts and protection from being disconnected. Bill payments will also be deferrable, on a temporary basis. The commission, which is the EU’s executive body, also said it would investigate potential anticompetitive behavior in the EU energy market.

“As we emerge from the pandemic and begin our economic recovery, it is important to protect vulnerable consumers and support European companies,” said Kadri Simson, the energy commissioner. “The Commission is helping member states to take immediate measures to reduce the impact on households and businesses this winter.”

Simson urged governments to address the social impact of the energy price surge by tapping their rising revenues from the EU’s emissions trading scheme.

Gas prices

The energy crisis has several dimensions, but for Europe the biggest immediate issue is the price of gas, supplies of which are constrained. In a Q&A document accompanying Wednesday’s communication, the European Commission appeared to throw shade at Russia, which some experts have accused of holding Europe hostage in hopes of getting the new, highly contentious Russia-Germany Nord Stream 2 pipeline up and running.

“Lower-than-expected gas volumes have been observed coming from Russia, tightening the market as the heating season approaches,” the Q&A said. “Though it has fulfilled its long-term contracts with its European counterparts, Gazprom has offered little or no extra capacity to ease pressure on the EU gas market. Delayed infrastructure maintenance during the pandemic has also constrained gas supply from Russia and other suppliers.”

Also on Wednesday, Russian President Vladimir Putin said his country was ready to supply Europe with as much gas as it needs. He also predicted that the role of natural gas in Europe’s energy mix would rise. “We ensure guaranteed, uninterrupted gas deliveries to Europe,” Putin said at the Russian Energy Week event. “We have all the reasons to believe that by the end of this year we will reach record levels of gas deliveries to the global market.”

Meanwhile, Kremlin spokesman Dmitry Peskov said Russia would boost supplies arriving in Europe via Ukraine—the route that Nord Stream 2 opponents are trying to protect, for the sake of Ukrainian transit revenues—if the EU steps up its purchases from Russia’s state-controlled Gazprom.

As far as the European Commission is concerned, future energy security lies not with fossil fuels such as gas, but rather down the path of renewables—investment in which needs to be drastically increased if the world has any hope of meeting net-zero goals, the International Energy Agency (IEA) warned Wednesday.

Renewable future

“Renewable electricity prices continue to be lower and more stable than fossil fuels,” the European Commission said in the Q&A. “Investments in clean domestic energy production and greater energy efficiency reduce the EU’s energy import bill and dependence on non-EU suppliers.”

This focus is apparent in the list of medium-term measures that the commission unveiled Wednesday, alongside the short-term emergency toolkit. The commission said it would speed up the permitting process for renewables, boost investment in the sector, and develop the energy storage capacity that’s needed to support it.

What’s more, the EU executive said it would ask European energy regulators to examine the bloc’s current electricity market design and recommend any necessary changes. It also said it would look into the idea of EU countries jointly buying gas supplies.

Consumer advocates welcomed Wednesday’s announcement. “The commission has issued strong, consumer-centric recommendations. Now we need to see urgent action from national governments to follow through on this ambition, implement these measures, and protect consumers from these rapid price rises,” said Monique Goyens, the director-general of BEUC, the European Consumer Organization.

“Looking ahead, we need to depart from our energy dependency on fossil fuels and the volatile global markets that expose consumers to price spikes. There is no better way to do that than to accelerate the shift to renewables. Policymakers should accelerate this shift. Only this will guarantee both affordable energy to European consumers and reductions in carbon emissions.”

However, Europe’s energy sector is cautious. In a letter due to be published later on Wednesday, the CEOs of utilities such as Enel and Orsted wrote to governments to warn against “shortsighted political measures” as a response to the crisis.

The executives were particularly concerned about a windfall levy that the Spanish government imposed on that country’s largest providers last month: Owing to the design of daily wholesale power auctions, soaring gas prices raise the amount the government pays for all energy, even that coming from cheap renewables, so the government is trying to claw back the money to pass it on to consumers.