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Countries caution EU against reforming energy market in crisis mode

by Matthew Atungwu February 14, 2023
written by Matthew Atungwu February 14, 2023
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In response to volatile energy prices, officials from Denmark, Germany, the Netherlands, Estonia, Finland, Luxembourg and Latvia have cautioned the bloc against making hasty changes to the EU’s electricity market structure. The countries demanded changes to the current system instead.

The EU Commission will end its public comment period on the proposed changes to its electricity market regulations today. In order to support the energy transition and increase market resilience while reducing the impact of gas prices on electricity bills, lawmakers want to address certain aspects of the market structure.

The Commission hopes to avoid repeats of the surge in electricity prices seen last year after Russia cut gas supplies to much of Europe. This came in response to sanctions imposed on Russia after the country’s invasion of Ukraine.

Led by Denmark, the seven countrues have said in a letter Europe’s existing market design should mostly be preserved and that any changes should be targeted. Signatories argue that it has fostered years of lower electricity prices, helped to expand renewables, and has ensured enough power production to meet demand and avoid shortages.

Read also: Research shows Europe spend over 800 billion euros on energy crisis

The letter recommended eight key principles by which the market reforms should abide, prioritising lower wholesale prices, greater security of supply and enabling the large-scale integration of renewable energy. It said that these “will bring benefits to consumers, while at the same time protecting them against price peaks”.

It emphasised that the challenge of affordable electricity should not be addressed in a way that endangers decarbonisation efforts and must still focus on medium- and long-term climate targets.

“Any reform going beyond targeted adjustments to the existing framework should be underpinned by an in-depth impact assessment and should not be adopted in crisis mode,” said the letter to the Commission.

The signatory countries said that there is room for some improvement in the current design given soaring energy costs, but any changes must protect the single market in a way that allows it to still function and incentivise investment in the green transition.

The call to protect the EU’s single market has been echoed by several governments in recent days.

A statement released last week on Finland’s government website said that Prime Minister Sanna Marin has “emphasised that the EU can only succeed in global competition by focusing on its own strengths, such as a well-functioning single market. Finland emphasised that any short-term measures must support long-term competitiveness”.

Estonia Prime Minister Kaja Kallas said in a tweet on Friday that the single market is the EU’s “greatest asset”, and that “fair competition must not be undermined by extensive subsidies but boosted by simplifying the rules”. She added that “we need a strong single market to deliver [a] green and digital transition”.

However, other countries, including Spain and France, have opposed a moderate stance, calling instead for deeper reforms to the current market design. Spain has proposed the promotion of schemes such as contracts for difference (CfDs) as a method of regulating nuclear and hydroelectric power prices.

This story was adapted from Power Technology.

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