Germany calls for taxonomy changes, EU27 move forward on energy crisis reaction

Germany has called for changes to the European Commission's draft sustainable finance taxonomy guidelines on nuclear and gas, while EU energy ministers have made some progress in informal talks on guarding against future gas price spikes.

Jan. 21/22 talks at Amiens were split by the overnight deadline for member states to comment on the Dec. 31 draft by the EC on the taxonomy.

Germany's new coalition government itself remains split, with the two ministers in charge of the matter saying Jan. 22 that changes to the proposed criteria for new gas plant would need to be made before formal adoption by the EC later this month.

"Should the delegated act remain unchanged with the Commission not taking into account the critical feedback from several member states, Germany should reject the act in our opinion," energy minister Robert Habeck and environment minister Steffi Lemke said.

Vice-Chancellor Habeck is to meet Commission President Ursula von der Leyen Jan. 25.

Germany called for more realistic criteria regarding the blending of hydrogen into the gas grid to make new gas-fired power plant investments compliant as sustainable.

Europe's biggest economy has also called for separate criteria for combined heat and power plants (CHP) and so-called fuel switch projects replacing new coal and as well older gas plants.

The current 55% threshold to reduce lifespan emissions was seen as unrealistic.

Germany rejects the inclusion of nuclear but sees new gas-fired power plants as essential to phase-out coal by 2030.

Limited availability of hydrogen in the mid-term makes interim steps unrealistic and would endanger 2030 industrial decarbonization targets if the tight taxonomy criteria would need to be applied to power plants, it said.

Austria, Denmark, Luxembourg and Spain reject the inclusion of nuclear and natural gas in the draft.

Once the EC adopts the delegated act only a qualified majority of EU member states can veto the plans from becoming law requiring 20 members states representing 65% of the EU population or a majority of MEPs to veto the act -- an unlikely prospect with large member states like France or Poland in favor of nuclear.

S&P Global Platts Analytics sees "only limited upside for new nuclear and gas generation projects particularly in Western Europe," it said in a note Jan. 14, with installed unabated gas-fired capacity set to peak at 171 GW in 2026 and some 108 GW new capacity with CCUS, hydrogen and biomass to be added by 2050.

Energy crisis reaction

Europe's energy price crisis topped the agenda at Amiens, but focus is shifting from emergency measures to "medium and long-term strategies to guard against situations such as these in the future", according to a statement by the French presidency.

Europe's gas price benchmark TTF month-ahead was assessed at Eur79.825/MWh ($90.2/MWh) on Jan. 21, up fourfold year-on-year, but below spikes seen in December, S&P Global Platts data showed.

The 27 ministers and EC energy commissioner Kadri Simson outlined ways to secure supply and manage costs setting out key pillars for report by regulatory body ACER on EU gas and power markets due in April.

Member states are split on market design with France pushing for a move away from the current marginal prices strongly opposed by a majority of member states.

Progress was made on key pillars including:

• "facilitating the sharing of decarbonization dividends" as a way for member states to recover windfall gains in certain cases
• "optimization of production through more effective short-term markets"
• "solidarity in terms of security of supply and examining the best and least costly ways of consolidating future investments in the energy transition"
• "ensuring the supply of gas and seeking to optimize the use of European storage capacity"

Flexible hydrogen imports

Meanwhile, there was common ground to adopt new energy efficiency guidelines as part of the EC's proposed 'Fit for 55' package.

Energy minister also discussed next steps for hydrogen.

"Many ministers highlighted the risks associated with flows of massive imports, but also the necessity of a flexible regulatory framework for this emerging market," it said adding that European technical solutions in particular electrolysis also needed to be accelerated.

So-called 'Important Projects of Common European Interest' are set to be confirmed this quarter to allow final investment decisions on first large-scale projects.

Platts assessed hydrogen via electrolysis (PEM including capex, Netherlands) at Eur13.70/kg Jan. 21 compared to Eur5.39/kg for blue hydrogen (SMR with CCS including capex and carbon).