All eyes were on Ursula von der Leyen’s State of the Union address in Strasbourg today as UK businesses hoped EU plans to address spiralling commodity prices might have wider reaching implications on UK markets.

As speculated in recent days, no immediate plans for a market price cap were released. Instead, the EU announced it will;

• Limit the revenues of companies producing electricity at low cost (nuclear and renewable generators) and levy ‘windfall taxes’ on major oil, gas and coal companies
• Use resultant revenue of circa €140bn to subsidise domestic and business support packages across member states
• Target a reduction in peak energy demand of 5% to reduce costs
• Improve longer term liquidity on electricity contracts by changing collateral requirements and limiting intra-day volatility

President von der Leyen repeated the view that the current market needed reform and that longer term action was required to remove the reliance on fossil fuels; pointing to Denmark as a visionary within the EU that understood the problem decades ago.

She also recognised that the announced actions were all emergency and temporary measures, including discussions on price caps, and insisted that the EU needed to keep working to lower gas prices.

As such, a number of additional ongoing objectives were referenced;

• To decouple the dominant influence of gas on the price of electricity, starting with a deep and comprehensive reform of the electricity market
• Establishment of a task force to ensure diversification away from Russia to reliable suppliers such as the US, Norway, Algeria and others
• Continued financing of new wind turbines and solar parks, high-speed trains and energy-saving renovations through NextGenerationEU
• Creation of a European support fund of €3bn to develop the hydrogen market

Gas markets gained circa 10% through the day on the apparent lack of an announced price cap. However, news that the required detail supporting the UK Government’s plan to support UK businesses this winter could be delayed until November will have inevitably helped drive wholesale prices upwards.

Adalta Energy understands that this is an uncertain and extreme time for UK business. If you have any questions on the ongoing energy crisis or require any assistance, then please contact enquiries@adaltaenergy.co.uk or call Ed Butler directly on 07989 431184.