the European Commission proposed to extend the emergency measures

 introduced in the autumn of last year by 12 months. These include the gas price cap, 

faster permitting rules for renewable projects

. Their continued application now needs to be approved by the Council on 19 December 2023, with no agreement from the Parliament required in line with Article 122(1) of the Treaty of the Functioning of the European Union procedure.

and national gas demand reduction measures are not part of the proposal to extend the emergency measures, as the former market intervention reduced investment appetite in renewable projects in the EU in 2022 and the latter is in force until 31 March 2024.

The move comes amid continued concerns about gas supplies for the winter and the potential volatility of the market. Since under the merit order, the most expensive energy source sets the price, electricity prices and thus consumers are affected by disruptions in the oil and gas markets.

 can, if they materialise, fuel the fear of scarcity which, given the fragility of the market due to its tightness, may trigger large reactions with serious repercussions on prices. These risks include:

a rebound in Asian LNG demand reducing the availability of gas on the global market; 

a cold winter which could lead to increased gas demand of up to 30 bcm;

extreme weather potentially affecting hydropower storage and nuclear production due to low water levels, and the subsequent increase in demand for gas-fired power generation;

further disruptions of critical infrastructure;

a deterioration of the geopolitical environment and threat landscape in supplying regions, for example with the crisis in the Middle East.

Specifically, with the start of the Israeli-Palestinian conflict in October, gas prices reacted strongly to the Hamas attacks on concerns over the loss of Egyptian LNG volumes to Europe and the risks posed by the spread of conflict in the Middle East. Although gas prices have largely stabilised this November at around 40 EUR/MWh, they are still elevated since the start of the conflict as uncertainty remains over the potential supply risk, were Iran to block the Strait of Hormuz, cutting off Qatari and Emirati LNG deliveries.

The extension of the third emergency measure on faster permitting for renewable projects beyond 30 June 2024 was requested by Germany to bridge the gap until the revised Renewable Energy Directive with permitting provisions is transposed into national law by Member States. Until June 2025, permit-granting should take no longer than three months for solar equipment, six months for repowering of RES plants, and one to three months for heat pumps. This should facilitate the roll-out of renewables in the short to medium term.

Speedier permit-granting process was previously alluded to in the 

The overriding public interest principle was also introduced in the emergency regulation and later solidified in the RED.

Taken together, the emergency measures should lower the risk profile for another energy crisis and help prepare Europe for any potential supply shocks, as the EU embraces a precautionary approach. Last year, the Commission experimented with its toolbox by way of trial and error and settled on a list of regulatory instruments that work best in a crisis setting.

This year’s prolongation reflects this as measures such as the inframarginal revenue cap are excluded, which was deemed detrimental to RES projects. At the same time, the move signals continuous and unwavering political support for the increased renewable ambition at times when the sector struggles with inflation, rising commodity prices and higher borrowing costs.

Extension of permitting rules should unlock the supply of RES projects currently stuck in the permitting procedures (e.g. 

approximately 80 GW of wind power capacity is jammed across Europe

) and allow to speed up RES deployment long-term. This could help maintain the status quo in the GO market, with RES GOs supply outstripping the demand.

In practice, however, analysis by SolarEurope reveals that some provisions of the RED (identical to the emergency regulation) such as deadlines for permit granting show the biggest discrepancy with the national regulations. Thus, most Member States lack clear rules concerning deadlines and penalties for permit delays, while staffing shortages hinder meeting existing deadlines.

Belgium, Germany, Portugal, and Spain are the only countries that have successfully implemented reforms to speed up project permitting. This resulted in a record volume of new permits issued in Germany in 2023.

RES deployment, although accelerated through regulatory means, may be slowed down by the aforementioned practicalities and delays in implementation of existing legislation at national, regional and local levels. This could affect GO price evolution, exerting upward pressure on the price curve, if additional capacity is not brought online soon enough to sufficiently match the rising GO demand.

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The proposed extension of EU’s emergency measures until 2025 spells out continued support for renewables with faster permitting still on the agenda, while the inframarginal market revenue cap (in force from October 2022 to June 2023) is not reintroduced.

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Energy-crisis era emergency measures extended until 2025

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