There is no going back to Russian fossil fuels, the European Commission insists. Yet the looming energy crisis, triggered by the US-Iran war requires extraordinary measures. Commission President Ursula von der Leyen has indicated it is willing to set a price cap on gas, a move that may potentially backfire.
The Berlaymont press room on March 11th it buzzed with queries about the European Commission’s options for taming the latest energy shock. Ten days into the Iran war, wholesale gas prices hover near records and the fear of another winter crunch is back. The team of spokespersons offered a glimpse of what the college of commissioners will place on leaders’ desks next week. “We are exploring subsidising or even capping the gas price,” she said, repeating a line the President had delivered to Parliament hours earlier.
The spokeswoman sketched the four ingredients of a typical power bill. Roughly half is the market cost of energy itself; the rest splits into grid fees, taxes and levies, and carbon allowances. Those shares vary, but the maths exposes where policy bites hardest when war squeezes fuel.
Security of supply
The present market design—where the marginal gas unit sets the electricity price—has “delivered security of supply”, she insisted. Yet the same design now magnifies fossil volatility. Hence the price-cap option, the most eye-catching of several ideas that also include wider use of power-purchase agreements and contracts for difference.
Reporters pressed for mechanics. Would Brussels dictate a single ceiling across the bloc, copy Spain and Portugal’s regional ‘Iberian exception‘, or use subsidies to mask wholesale spikes? Officials demurred. Technical papers, they said, will reach the European Council within days.
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One point, however, was crystal clear. When journalists aired President Vladimir Putin’s offer of cheap long-term contracts, the spokeswoman reiterated Ms von der Leyen’s earlier position. “Going back to Russian fossil fuels would be a strategic blunder,” she said.
War in the Gulf has also rekindled arguments over infrastructure. Prime Minister Robert Fico says the Commission will pay to repair the Druzhba pipeline so Slovak refineries can again tap Russian oil via Ukraine. Brussels has “no decision or costing” yet, though it is “looking into options to support the resumption of oil flows via Druzhba”. Hungary claims an EU envoy will soon inspect the damage; the Commission says it knows nothing of the trip.
Patching the pipes
The gas cap debate touches transmission too. Europe pledges to double renewable capacity this decade, but bottlenecks abound. “It is not fully fit for purpose for future,” the team admitted, describing a power grid that is both the world’s most meshed and woefully antiquated. A “grids action plan” exists, a legislative package is coming and money appears in the next EU budget, yet permits still crawl and investors grumble.
Going back to Russian fossil fuels would be a strategic blunder. — Ursula von der Leyen, European Commission President
Storage remains the bright spot. “Our emergency stocks, oil stocks, are full,” said the spokewoman. The International Energy Agency has asked members to release barrels, but any draw-down will be voluntary. “Individual member states can release volumes,” she noted; they must merely tell Brussels once they act. Gas caverns stand above seasonal norms, though officials concede that another Hormuz closure could empty them fast.
If the college plumps for a hard price cap, it must square several circles. A ceiling low enough to shield households could scare cargoes toward Asia unless the Union also offers subsidies or European buyers shoulder the extra cost. Spain and Portugal spent about €8bn compensating generators during their fourteen-month cap, a figure the Commission still cannot confirm.
Caps, carrots or both
Northern states fret that broad subsidies would blunt price signals and slow the shift to renewables. Eastern capitals, more exposed to pipeline gas, fear another solidarity row like the one that scarred 2022.
Officials hint that the favoured model may blend carrots with discipline. Subsidies could offset peaks for power plants while a looser cap reins in runaway trades at the Dutch TTF hub. The emergency ‘market-correction mechanism‘ adopted in 2022, renewed once and due to lapse in January 2025, offers legal scaffolding. Renewal or replacement now hinges on how the Gulf crisis unfolds, and on whether leaders stomach another leap into untested policy.
Ms von der Leyen and her team of commissioners have six days to refine spreadsheets and legal clauses. By 19 March they must decide whether to anchor expectations with a firm number or delay in hope that markets calm.
For now the Commission walks a narrow ridge: reassure consumers, deter Moscow and keep faith with market principles. The next summit will show whether that balance survives the heat of geopolitics or yields to the blunt tool of a cap.
