Energy: EU: Better protect consumers from escalating electricity prices

Energy: EU: Better protect consumers from escalating electricity prices

After Russia’s attack on Ukraine, the price of electricity skyrocketed – which consumers in the EU noticed painfully. This should be avoided in the future. But how exactly is this supposed to work?

Consumers in the EU should be better protected from escalating electricity prices in the future. Negotiators from EU countries and the European Parliament agreed in Strasbourg on a reform of the European electricity market. In addition to more stable prices, the innovations are intended to promote the expansion of renewable energies. Below are some questions and answers.

How does the electricity market work in the EU?

The electricity market in the EU continues to function 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.

Why is the electricity market in the EU being reformed?

Due to extremely high electricity prices last year, calls for a reform of the European electricity market had become loud. The reason for the high prices was, among other things, exploding gas prices due to the Russian war of aggression on Ukraine. It was also noticeable that at times around half of the French nuclear power plants failed due to defects or maintenance. The European Parliament said the reform aims to make the electricity market “more stable, affordable and sustainable”. The basis for the agreement that has now been found was a legislative proposal from the EU Commission from the spring.

What applies to consumers?

In the future, consumers will have the right to both fixed-price contracts and contracts with dynamic prices, as Parliament announced. They should also receive important information about the options they are taking out. Furthermore, providers should not be allowed to change the contract terms unilaterally. “This is to ensure that all consumers, including small businesses, benefit from long-term, affordable and stable prices and to mitigate the impact of sudden price shocks,” it said.

The federal states should also prohibit suppliers from cutting off the electricity supply to vulnerable customers – including in the event of disputes between suppliers and customers, as Parliament announced.

In the event of an electricity price crisis, which can be declared by EU countries under certain conditions, electricity prices for vulnerable and disadvantaged customers should be able to be further reduced, as the countries’ communication shows.

How should renewable energies be expanded?

The focus of the reform is new long-term contracts between governments and electricity producers, so-called Contracts for Difference (CfDs). With these contracts for differences, states guarantee electricity producers a minimum price for electricity when they make new investments. This should apply to investments in renewable energies such as wind and solar power and nuclear power.

If the market price falls below an agreed price, the state steps in and makes up the difference. If the price is higher, the surplus goes to the state. This is intended to create incentives for the domestic production of clean electricity.

What are the reactions?

The Green group in the European Parliament cannot support the agreement reached, said German MP Michael Bloss on Thursday. There are positive elements in the agreement, such as progress on the social side. But too many coal subsidies are possible. “One day after the historic agreement at the climate conference in Dubai, the EU decides on new fossil subsidies for the dirtiest coal-fired power plants. This makes the EU completely untrustworthy.” With this agreement, the EU could immediately give up its distinction as a climate pioneer.

The energy policy spokesman for the Christian Social EPP parliamentary group, Christian Ehler (CDU), said that the agreement would help significantly to achieve the expansion goals for renewables and to ensure citizens better access to stable, inexpensive and clean energy in the long term. “At the same time, we protect market participants from arbitrary interventions in the market, which would discourage investments and thus move us away from our expansion and climate goals.”

What’s next?

The agreement still needs to be formally confirmed by the EU Parliament and the countries before the reform can come into force.

Source: Stern

Leave a Reply

Your email address will not be published. Required fields are marked *

Latest Posts