EU launches debate on electricity market reform
In the context of the upcoming EU proposal on repairing the current electricity market design, scheduled for the end of March, the EU launched a public consultation on Monday. The debate lays out several possible options “to build a more resilient market, providing an added value for European citizens and the industry at large in the current crisis context and beyond.”
The expected proposal in March will aim to protect businesses and households from high energy bills and at the same time accelerate the energy transition of the European Green Deal. In other words, the EU intends to lower the price of renewables and spread the benefits of cheap electricity to all its consumers. In a press release statement, EU energy commissioner Kadri Simson referred to this point by stating that “the unprecedented energy crisis we are facing shows that we need to make the electricity market design fit for the future, allowing it to deliver the benefits of affordable clean energy to everyone.”
Nevertheless, some Member States are pushing for more – and faster. Specifically, Spain and France have been increasing the pressure lately. In its paper, Spain aims to limit the impact of high gas prices on electricity prices. This should happen primarily because the electricity from renewable energies is sold less frequently on spot markets and more frequently via fixed supply contracts. France, however, wants to go further. Their proposal describes a fund that will collect the profits from all wind, solar and nuclear power plants and give them back to consumers. Moreover, the fund should guarantee these producers a minimum price for electricity. At the same time, France has been vocal about wanting parts of the reform to be adopted “within the next six months”.
Usually, decisions in the EU can take a long time and the time window for new laws closes towards the end of the year. After that, the election campaign will overshadow all discussions, and the European Parliament is set to be re-elected in spring 2024. Therefore, in the face of such heightened ambiguity, many in the energy industry doubt that a quickly drafted reform will solve more problems than it creates. Last September, Commission President Ursula von der Leyen promised a “deep and comprehensive reform of the electricity market”.
However, the last electricity market reform had a lead time of nine years before it came into force in 2019. Although the proposal is due end of March, an impact assessment, which are EU evaluations that the EU Commission prepare before any upcoming and important legislative projects, has yet to be announced.