Valentine Okafor
The Renew Europe Group has applauded proposals by the European Commission on the EU´s internal electricity market design.
The proposals aims to tackle the shortcomings of the EU energy market in the wake of the supply shock to the system following the outbreak of war in Ukraine.
In the current energy crisis, existing instruments to protect industries, SMEs and vulnerable households against volatile and unrelenting high prices have proven to have limits.
As part of this reform, Renew Europe calls for more flexibility in the electricity grid, as well as a truly European future-proof energy system integration, based on diverse and energy infrastructure projects, especially cross-border, that produce, store, and distribute energy efficiently.
To ensure that this transformation unfolds rapidly, all regulatory obstacles must be removed and private capital mobilised, so energy systems of EU countries can benefit from accelerated permitting procedures and funding.
Moreover, our political group advocates for the rights of consumers to a wider choice of fixed-rate contracts and to better and more secure supply conditions, while measures to counteract short-term price peaks through power purchase agreements for companies and SMEs. Finally, renewables, energy efficiency and energy infrastructures must also play a key role in achieving these objectives in the long-term, while enabling progress towards European energy sovereignty and the net-zero economy.
MEP Morten Petersen, Vice-Chair of the Committee on Industry, Research and Energy (ITRE), said: “We still don’t have an internal market for energy, and there is a long way to go before cheap, green electricity can flow freely across Europe’s border. We need to quickly boost the integration of renewables in our energy systems, and use this platform to set us free from Putin’s gas.
We will put importance on creating energy security and price stability for European citizens and businesses, as well as security for the investors waiting to invest in Europe’s promising renewable energy potential.”
The European Commission is set to propose a revamp of Europe’s electricity market rules on Tuesday, aimed at expanding the use of fixed-price power contracts to shield consumers from severe price spikes like those experienced last year.
The European Union vowed to overhaul its electricity market after cuts to Russian gas after its invasion of Ukraine last year sent European power prices soaring to record highs, forcing industries to close and hiking households’ bills.
Draft versions of the EU proposal, seen by Reuters, outline measures designed to make consumers less exposed to short-term swings in fossil fuel prices – by nudging countries to use more contracts that lock in stable, long-term electricity prices.
Future state support for new investments in wind, solar, geothermal, hydropower and nuclear electricity, for example, must be done through a two-way contract for difference (CfD).
Two-way CfDs offer generators a fixed “strike price” for their electricity, regardless of the price in short-term energy markets.
Countries would also need to do more to encourage power purchase agreements (PPA) – another type of long-term contract to directly buy electricity from a generator – such as by providing state guarantees for such contracts.
Fossil fuel-powered generators would not receive this support. The aim is to direct support towards the huge investments in renewable energy EU countries need to quit Russian fossil fuels and meet climate change goals.
Other elements aim to push gas out of Europe’s energy mix faster – for example, by requiring countries to expand energy storage and other alternatives to replace the role gas plants play in balancing the power grid.
Currently, power prices in Europe are set by the final generator needed to meet overall demand. Often, that is a gas plant, so gas price spikes – like those caused last year by Russia slashing gas deliveries – can send electricity prices soaring.
Despite Brussels pitching the reforms last year as a chance to “decouple” gas and power prices, the draft proposal – which could still change before it is published – avoids the deep electricity market reform that countries, including Spain and France, have called for, opting instead for more limited tweaks to stabilise prices.
Another camp of countries, including Germany, Denmark and Latvia, have warned major changes could scare off investors.
EU countries and the European Parliament must negotiate and approve the final rules, with some pushing for a deal by the end of the year.
Marco Foresti, market design manager at the European Network of Transmission System Operators (ENTSO-E), said the draft proposals had been met with “a bit of a sigh of relief” among those concerned about disrupting the functioning of short-term energy markets.
