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Georg Zachmann Profile picture
@GeorgZachmann
May 31, 2022 • 6 tweets • 3 min read • Read on X
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Habemus embargo ("in principle")

1/4 The good news is political:
+ EU was able to engineer unanimity
+ DE substantially contributed (N Druzhba)
+ insurance and oil products included
+ an instrument to build on
2/4 The weaknesses I
- lack of price instrument (e.g., tariff) might initially overcompensate lost volumes by higher prices
- relatively long phase-in will allow RU to seek alternative buyers

bruegel.org/2022/05/a-phas…
3/4 The weaknesses II
- effectiveness mitigated by list of exemptions incl. S Druzhba and shipping services
- specific exemptions show MS pressure points (vacuum oil in HR and long transition in BG)
- limited preparation for RU reaction
4/4 Room for improvement
+ closely monitor RU exports (see our oil tracker↓)
+ tighten screws accordingly (convince other buyers to join sanctions, make exporting RU oil/products more difficult)
+ seek alternative supplies (convince OPEC?)
+ reduce demand (-> no fuel subsidies)
Some reading:

Reducing RU export revenues: bruegel.org/2022/04/how-a-…

Improving the management of the domestic shortfall:
bruegel.org/2022/05/the-eu…

Oil ship tracker
bruegel.org/publications/d…
And here some more background:
bruegel.org/2022/03/can-eu…

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More from @GeorgZachmann

Georg Zachmann Profile picture
Mar 8, 2023
Hot-take on the EMD draft:

Given the discussions in 2022, the COM proposal is not a revolution. But it is not only window-dressing, either. Some provisions might kick-off structural shifts:

(some 20 tweets)
Supporting PPAs 1/2
-the guarantee-system is described as a new form of subsidy
-text already hints at the risk of lowering liquidity of more standardised markets
Supporting PPAs 2/2
-building a system on idiosyncratic contracts with many small players might also entail risks - can we make sure, that sellers do not sell more than they have
-allowing (national) state guarantees for PPAs might lead to a fragmentation of the internal market
Read 17 tweets
Georg Zachmann Profile picture
Jan 24, 2023
A 🧵on the cover of the #MarketDesignConsultation. The bullet points are my summary of the text, and my comments are in brackets.

[The document seems to have had some last-minute changes, given some word duplications and reference to earlier parts that do not exist]

1/
Causes
•High gas prices due to Russian gas withholding
•increasing energy demand after Covid
[Lack of hydro and French nuclear not mentioned even though that shortfall represented 7% of EU power generation in 2022]

Problem Description
•high prices
•Risk to SoS

2/
Current crisis policies
•Reduce consumption (mentioned 3x)
•Roll-out RES
•Secure alternative supplies
•Temporary state-aid framework
•Gas storage regime
•« EU implemented … Price-limiting regimes to avoid windfall-profits in elec&gas» [what are those ?]

3/
Read 25 tweets
Georg Zachmann Profile picture
Jan 6, 2023
Germany discusses a special "industrial electricity tariff" to protect large industrial consumers.

A few very quick thoughts:
1/5
This would continue a long-standing German tradition of cross-subsidizing selected sectors based on higher electricity cost for all other electricity consumer.

[Table from our chapter on distributional effects of electricity market design] bruegel.org/sites/default/…Image
And this, while the potentially to-be-subsidized sectors on average produce less value added and jobs than other sectors.

bruegel.org/sites/default/…Image
Read 6 tweets
Georg Zachmann Profile picture
Dec 24, 2022
2022 was a sad and dramatic year. Energy was a main battlefront in the economic war of attrition between Russia and the pro-Ukrainian coalition.

A (highly selective) month-by-month recap 🧵
PRELUDE - SUMMER 2021
Russian manipulation of European natural gas markets started in summer 2021. Gazprom’s withholding of supplies marked the beginning of an energy crisis with substantially rising prices.
JANUARY 2022
While Russia concentrated more troops around Ukraine, it also ensured that EU gas storages remained empty, while teasing supplies through NordStream2.
Read 15 tweets
Georg Zachmann Profile picture
Oct 21, 2022
The "Iberian exception" could be a substantial draw on scarce gas supplies!

German power plants would in specific situations use TWICE as much natural gas, if the gas price were subsidized from 150€/MWh to 50€/MWh!

1/3
 [thx to @c_heussaff for calculations!] ImageImage
We use @ewi_koeln's cool merit order tool, adjust the fuel cost assumptions to be roughly in line with current numbers and assume a situation with a residual demand of 50 GW.

tool: ewi.uni-koeln.de/en/publication…
2/3 Image
Under these specific assumptions, we have 18 GW of gas fired power plants running, instead of 8 GW.

As the additional 10 GW units that are only used at subsidized prices are less efficient, the gas burn is disproportionately higher.

3/3
Read 4 tweets
Georg Zachmann Profile picture
Oct 20, 2022
Cher Jean-Michel, I am afraid you are right. As energy gets much more expensive certain production will become uncompetitive in Europe without additional subsidies.

I see two political questions: …

1/5
First, should we particularly support energy-and-trade-intensive sectors? This would keep their substantial energy demand high – resulting in much higher energy prices for all other industries.

2/5
Second, should we try to delay the adjustment process to allow for a smoother transition of value chains – or does this actually only extend the harm (of high prices) for everyone?

3/5
Read 5 tweets

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