EU Eyes Gas Price Cap, Betting on Renewables

February 12, 2025

The European Commission is exploring the introduction of a temporary gas price cap to address the widening gap between European and US energy costs. European gas prices have surged to their highest levels in over two years, exacerbated by cold weather and weak wind power generation, leaving businesses struggling with energy expenses that are three to four times higher than those in the US.

The proposed cap is being discussed as part of the EU’s forthcoming “clean industrial deal,” aimed at supporting European heavy industries amid geopolitical and economic challenges. This includes countering the impact of US trade policies and ensuring stability in the EU’s energy markets.

However, industry groups have voiced strong opposition, warning that such measures could undermine trust in the European gas market. Eleven organizations, including Europex and the financial markets lobby group AFME, have urged European Commission President Ursula von der Leyen to reconsider, arguing that a cap could disrupt the benchmark Title Transfer Facility (TTF) and push global traders toward alternative pricing mechanisms outside the EU.

Beyond short-term price controls, experts argue that the EU’s long-term energy stability lies in accelerating the transition to renewable energy. Expanding wind and solar power capacity, which reached record highs in 2023, along with improving grid-scale battery storage, can reduce dependence on volatile fossil fuel markets and bring down gas prices. Investment in green hydrogen, backed by companies such as ITM Power, and advanced energy storage technologies from firms like Invinity Energy Systems, could further bolster energy security and affordability.

Industry analysts highlight that green hydrogen and scalable battery storage solutions will be key to stabilizing energy costs. As the EU continues its transition, companies investing in these technologies will play a significant role in reducing fossil fuel reliance. Despite these advancements, some EU member states remain divided on market interventions, with Germany and the Netherlands voicing skepticism over a price cap’s long-term effectiveness.

As discussions continue, the balance between energy affordability and market stability remains a contentious issue, but one thing is clear: increasing renewable energy deployment, particularly in solar, wind, and energy storage, will be crucial in stabilizing European gas prices in the long run.