The Diplomat
A bloc of seven countries led by Germany sent a letter to the European Commission on Thursday calling for a limited reform of the electricity market that maintains the benefits of the system over the last decade and does not compromise the EU’s climate and energy objectives, an approach contrary to that of countries such as Spain, which advocates a structural overhaul.
The letter, also signed by Denmark, the Netherlands, Finland, Luxembourg, Latvia and Estonia, highlights the resilience of the electricity market in the face of the crisis resulting from Russia’s attack on Ukraine and recalls that its integration has brought “enormous benefits” to the EU, amounting to 34,000 million euros per year over the last decade, reports Europa Press.
Among these “benefits”, the countries highlight “lower wholesale prices, increased security of supply and the possibility of large-scale integration of renewable energy”, and call for electricity market reform to be assessed in terms of its contribution to these three key objectives.
“It is crucial that attempts to address the challenge of affordable electricity prices and security of supply do not jeopardise decarbonisation efforts and the proper functioning of the electricity market,” says the letter, which also stresses that “any changes to the design of the EU electricity market must be targeted, based on an impact assessment and guided by a number of key principles”.
To meet climate targets, the bloc points out that the EU needs 487 billion euros per year of investment in renewables between 2021 and 2030 and that its implementation requires a “reliable, predictable and robust market framework that ensures investor confidence and addresses both renewable and secure capacity”, given that “geopolitical challenges have made the importance of a competitive investment environment in the EU even clearer”.
For this reason, the bloc is “sceptical” about turning the general revenue constraints introduced by the temporary emergency framework into a permanent function of the regular market, warning that this could “compromise” investor confidence in the necessary investments.
The European Commission is due to present a proposal in March to redesign the bloc’s energy market after Russia’s invasion of Ukraine has sent gas prices soaring, a debate to which countries such as Spain and France have made their own contributions and which now, with this letter, is joined by seven others.
For its part, the Spanish proposal suggests the forward purchase of energy to reduce volatility and the price of electricity with the aim of decoupling the cost of renewable energy from gas prices, but while a new system is being designed -Spain was the first country to submit a proposal to Europe- the government has also asked Brussels for an extension of the Iberian gas cap mechanism in order to be able to continue reducing final consumer prices in the face of the rising cost of natural gas.
