Closing time: turn in all proposals for a net-zero market reform
Eurelectric
Voice of European electricity. Leading the energy transition through electrification #WePowerEU #Grids4Speed
On Monday, the European Commission ’s public consultation on the European electricity market design reached its conclusion. 1,350 valid responses were submitted (with almost 50% coming from Slovakia alone) from stakeholders across the EU to help the Commission understand how to best reform Europe’s electricity market to make it “fit for purpose”. We submitted our own response advocating for a market design fit for net zero, a call that many across the continent have echoed. What is clear is that the answer the Commission is seeking can be found in evolution, not revolution.
Response to the consultation
With the reform process, the Commission is seeking to establish a market design that can best deliver the benefits of low-cost, low-carbon energy to consumers, attract investment, and ensure security of supply. We have detailed how to solve this trilemma in our official response to the consultation, based on a position paper we released back in December and our upcoming #MarketDesign report slated for launch on 29 March.
Despite the contracted three-week response period, our detailed response lays out how we believe the current design effectively enables the short-term optimisation of the power system. That being said, there is room for a greater role for long-term hedging market instruments to shield customers from price volatility and offer investors long-term visibility on their return. It is important, however, that market participants can enter into these agreements on a voluntary basis. We dive deeper into this in our latest news piece.
Our Policy Director, Cillian O'Donoghue , summarised these points at Wind Energy Ireland ’s annual conference earlier this week, saying that in reforming Europe’s electricity market, we should follow a two-step approach.
“We should preserve the current European wholesale markets based on merit order and marginal pricing while developing at the same time a long-term market to reduce the influence of gas on prices and promote the necessary level of investment,”
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Tour de table: Member State responses
This week also proved that a significant number of Member States share our assessment on the priority of evolution over revolution, as proven by a joint letter from Germany, Denmark, Estonia, Finland, Luxembourg, Latvia, and the Netherlands. Their more cautious approach nonetheless aims to preserve the current market design while focusing reform on targeted measures that will accelerate the green transition and ensure affordable prices for consumers.
Other Member States submitted proposals as well, such as Poland’s nuclear-central proposal, or the more revolutionary French – and especially Spanish – proposals. However, as pointed out in an article by El Periódico de la Energía , (almost) everyone is in opposition to such reform – from electricity companies to regulators, the transmission operator in the Iberian market, the European solar and wind sectors, as well as the large consumers. This is welcomed news as we have stood starkly against the Spanish proposal since it was unveiled, as detailed in our response to their non-paper late last month.
As we await the final reform proposal from the Commission on 14 March, we will continue to push for European policymakers to prioritise an evolution of the market design over revolution. As we have said many times before and echoing EU Agency for the Cooperation of Energy Regulators (ACER) ’s findings in their Final Assessment of the EU Wholesale Electricity Market Design last April, the market is fit for purpose. We only recommend three add-ons to ensure it is well prepared for a net-zero economy.