In order to protect consumers from high electricity prices and to further promote renewable energies, the electricity market in the EU is to be reformed. Will the countries find a compromise?
The struggle to reform the European electricity market continues. At a meeting today in Luxembourg, the EU energy ministers want to continue discussing a compromise. According to EU diplomats, it remains to be seen whether the countries will reach an agreement. But they said they were close.
The aim of reforming the electricity market is to avoid high prices for consumers and promote the expansion of renewable energies. The EU Commission presented proposals for this in March.
Incentives for domestic production
The focus of the effort is new long-term contracts between governments and electricity producers, under which the state steps in if the market price falls below an agreed price. This is intended to create incentives for domestic production of clean electricity. This should apply to investments in renewable energies and nuclear power.
The positions of the countries have recently diverged widely. So far, Germany and France have mainly faced each other. Berlin fears that a provision in the new regulation allowing subsidies for nuclear power could ultimately distort competition in the EU to the advantage of countries with large nuclear power production, such as France.
With a view to the European elections next June, the EU countries are under increasing time pressure to find a common position. Because: Before the new rules can come into force, they must be agreed with the European Parliament. The EU Parliament had already agreed on a negotiating position in mid-September.
Calls for reform
Due to extremely high electricity prices last year, calls for a reform of the European electricity market had become loud. One reason for the high prices was that around half of France’s nuclear power plants temporarily failed. The increase was also a result of skyrocketing gas prices due to Russia’s war of aggression on Ukraine.
The electricity market in the EU works according to the so-called merit order principle. This refers to the order of deployment of the power plants offered on the electricity exchange. Power plants that can produce electricity cheaply are used first to meet demand. These are, for example, wind turbines. In the end, the price depends on the most expensive power plant that was switched on last – often gas power plants.
Source: Stern
