The President of the European Commission, Ursula von der Leyen, announced this Wednesday a “deep and global reform” of the European Union (EU) electricity market next year, which will aim to “decouple the dominant influence of gas” in the price of light electricity.
“The current conception of the electricity market -based on the order of merit- no longer does justice to consumers, who must reap the benefits of low-cost renewable energies, and therefore we have to decouple the dominant influence of gas on the price . electricity”, defended Ursula von der Leyen.
In her third speech on the State of the Union, at the plenary session of the European Parliament, in the French city of Strasbourg, the leader of the community executive announced: “We are going to carry out a profound and global reform of the electricity market”.
Scheduled for early next year, such an intervention is therefore intended to “look to the future”, at a time when Brussels is also trying to “deal with this immediate crisis”.
Apart from the emergency and temporary measures that Brussels is working on, for now there are maximum price limits for imported gas, specifically from Russia, after the European Commissioner for Protection revealed on Tuesday that “more studies” are needed on the impacts.
“We have to continue working to lower gas prices. We have to guarantee our security of supply and, at the same time, ensure our global competitiveness”, explained Ursula von der Leyen today.
Thus, “we will develop with the Member States a set of measures that take into account the specificity of our relationship with suppliers, from unreliable suppliers, such as Russia, to reliable friends, such as Norway”, he listed.
A benchmark for liquefied natural gas (LNG) is also being studied.
“Today, our gas market has changed drastically: from mainly pipeline gas to ever-increasing amounts of LNG, but the benchmark used in the gas market, the TTF, has not adapted and that is why the Commission will work to establish a more representative frame of reference,” said Ursula von der Leyen.
Support for “energy companies that face serious liquidity problems in the electricity futures markets, endangering the operation of the energy system” is also contemplated.
“We will work with market regulators to mitigate these issues by modifying collateral rules and taking steps to limit intraday price volatility,” he said.
For now, according to Ursula von der Leyen, Brussels “will change the time frame for state aid in October to allow the provision of state guarantees, maintaining a level playing field.”
In the current configuration of the European market, gas determines the global price of electricity when it is used, since all producers receive the same price for the same product — electricity — when it enters the network.
In the EU there has been a consensus that this current model of marginal prices is the most efficient, but the acute energy crisis, exacerbated by the war in Ukraine, has motivated the discussion.
As the EU relies heavily on fossil fuel imports, in particular gas from Russia, the current geopolitical context has caused volatility in electricity prices.
Due to their geographical conditions, Portugal and Spain have in force, temporarily between June 15, 2022 and May 31, 2023, a mechanism to separate the formation of the price of electricity in the Iberian Peninsula from the price of natural gas , which allows the latter not to affect the former.
Source: TSF
