An emergency life-raft of time-limited liquidity support is needed if Europe’s wholesale energy markets are to survive the price rollercoaster caused by the globe’s enduring crisis of supply, a trade body for trading has said.

According to the European Federation of Energy Traders (EFET), months of volatile gas and power prices on bourses such as the British-based ICE Futures Market, ICE Endex and Germany’s European Energy Exchange have strained balance sheets near to breaking point for some players in the markets.

Writing to members this month, the body advises that “an already challenging situation has worsened, and more energy market participants are in a position where their ability to source additional liquidity is severely reduced or, in some cases, exhausted.

“There is consequently a significant risk at hand that some firms might not be able to meet additional margin calls issued by their clearing bank”, EFET warns.

Still more market volatility resulting from sanctions on Russian interests could worsen trading conditions, so that – in EFET’s words – “generally healthy and sound companies will be unable to access cash to meet these unprecedented margin requirements”.

As a remedy, the body suggests state or parastatal financial overseers such as the European Central Bank or the Bank of England should set up emergency funding safety nets.  The new mechanisms could be triggered when the margin requirement for operation in the market reaches a level that will likely lead to several market participants defaulting.

Calls are growing on Europe’s governments to stiffen security of energy supply in a post-Covid, post-Ukraine environment across the continent.

The Johnson’s administration’s expected energy security paper is reportedly held up amid bickering between the Prime Minister and Chancellor Sunak over issues such as cutting fuel duty and squeezing more production from declining North Sea fields.

Johnson is believed to be leaning towards greater prominence for renewables, a goal for nuclear‘s contribution to rise to 25% of UK energy this decade, plus expanded domestic oil and gas production.

In the interests of national security rather than of climate change, Johnson is believed to be on the point of reversing his Conservative predecessor’s ban on new land-based wind generation.  New onshore turbines disappeared from Conservative energy policy in 2016, as David Cameron caved in to sustained opposition organised by MPs such as Chris Heaton-Harris, now a junior Treasury minister.


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