The EU agreed to limit gas prices, but some analysts are skeptical

The European Union Monday concluded two months of heated talks over how to protect households from rising energy prices — but some analysts argue the bloc’s solution is unsustainable and might not withstand the realities of a 2023 gas supply crunch.

EU members compromised by adopting a “dynamic” cap on the price that can be bid for front-month gas contracts on Europe’s benchmark trading facility.

The level at which the cap is triggered was lowered to 180 euros per megawatt hour, after an initial proposal of 275 euros per megawatt hour was criticized as far too high by countries including Poland, Spain and Greece.

Several conditions were inserted to allay the concerns of members such as Germany, which had argued that the scheme could result in gas shortages next year. These clauses prompt an automatic suspension of the cap and include the dynamic bidding rate dropping below 180 euros per megawatt hour for three consecutive working days, or the European Commission declaring an emergency.

The 180 euros per megawatt limit must be surpassed for three working days on Europe’s Dutch Title Transfer Facility (TTF), and it must be 35 euros per megawatt above the global reference price for liquefied natural gas over the same period.

Germany eventually voted in favor of the so-called “market correction mechanism,” but the Netherlands and Austria abstained.

Austria’s ministry for climate action said in a Tuesday statement that while it was “confident that the market correction mechanism can play an important role to avoid extreme spikes in European gas prices, the last minute extension of the mechanism on more gas hubs than the TTF does issue some concerns.”

The ministry noted that “there are some risks that the necessary safeguards are undermined by this extension.” Austria depends on Russian gas.

Rob Jetten, Dutch energy minister, said that the mechanism remained “unsafe” despite the latest improvements. He flagged that it could disrupt the European energy market, risk security of supply and have wider financial implications.

“From its inception, we have been very clear about this mechanism: it does not solve the core problem,” he said, adding that the Netherlands’ concerns were shared by the European Central Bank and by ICE (Intercontinental Exchange), the operator of the key natural-gas market in Europe.

The ECB earlier this month said “the current design of the proposed market correction mechanism may, in some circumstances, jeopardize financial stability in the euro area.” It declined to provide further comment to CNBC following the EU announcement.

ICE said in a statement it had “consistently voiced concerns” about the destabilizing impact of a price cap. It added that it would now review the details of the EU announcement to see whether it “can…