Electricity, Europe is embarking on its market reform

She was eagerly awaited, she is finally on the table. The reform of the electricity market was unveiled by the European Commission on Tuesday 14 March. In Strasbourg, the European Commissioner responsible for energy, the Estonian Kadri Simson, detailed the content of this overhaul of the rules. This had been promised by Brussels shortly after the outbreak of the war in Ukraine, which went hand in hand with a drop in Russian gas deliveries to Europe – thus driving up energy prices.

The objective of the European executive is threefold: to stimulate the production of renewable energies, to better protect consumers and to strengthen industrial competitiveness.

Division between Member States

Behind its very technical aspects, the overhaul of the electricity market is one of the central files of this beginning of the year for the European executive. It is also a source of division between the Member States, which are not unanimous on the solutions to be provided.

France, but also Spain and Portugal pleaded for a radical overhaul of the current system, in which electricity prices on the wholesale market depend on the cost of the last plant called, which runs most of the time on gas , hence the very high prices, in case of high demand. Conversely, seven countries, including Germany, had sent a letter in mid-February to the Commission asking it to content itself with a minimal reform, in order to adapt the market to the “new realities of renewable energies dominant”.

The initiative had been rather badly perceived in Paris, where one militated by radical changes, with in the first place the decorrelation of the prices of electricity of those of gas.

Paris succeeds in imposing its nuclear

Finally, the Commission proposes a compromise. It maintains the current pricing system (known as marginal cost), but gives States many facilities to circumvent it, by authorizing the multiplication of long-term contracts. This is a reversal in relation to the policy pursued in recent years, where the European authorities sought above all to develop competition between operators.

Intended to reduce price volatility, these “long-term signals” will be open to all “low-carbon” production units, i.e. renewable energies, but also nuclear, including existing power plants if Substantial investments have been made there, as is the case for EDF’s reactors, the lifespan of which is in the process of being extended. This is an important point for France. “This Commission proposal is a good basis for discussion,” said the office of Bruno Le Maire, the Minister of the Economy.

Now that the Commission’s “legislative package” has been presented, MEPs and Member States will seize it to negotiate it – certainly for months. “We are going to work to bring this reform to a successful conclusion as soon as possible”, assures Agnès Pannier-Runacher, the Minister of Energy Transition. However, it is not certain that the other Member States want to move as quickly.

Source