EU prepares reform of electricity market and Electric Mobility!

In an about-turn, the President of the European Commission, Ursula von der Leyen, acknowledged that the EU’s electricity market “does not work anymore” and needs to be adapted to the “new realities of dominant renewables”. #eudebates the unique initiative aiming to promote debate, dialogue, knowledge, participation and communication among citizens. #RepowerEU #Ukraine #VonderLeyen #EUROPE #SOTEU22 #soteu #Gas #Energy #soteu2022 Responding to questions from the European Parliament on Tuesday (8 June), von der Leyen admitted that current measures to address surging energy prices had fallen short of addressing structural issues in the EU electricity market. “Indeed electricity prices – energy prices – are skyrocketing. And we are doing a lot on it,” von der Leyen said, citing the “toolbox” put forward by the Commission in autumn last year, which allows EU countries to tax the windfall profits made by energy firms and subsidise energy bills for the most vulnerable households and small businesses. “But we also acknowledge that this is a short-term relief that will not change the structure of the market,” she added, saying power markets were “designed in a way like it was necessary twenty years ago” when the share of renewables was low. “Today, the market is completely different. It is the renewables that are the most cost-effective and the cheapest ones,” she explained. Gas prices have surged to record highs since the autumn on the back of tight supplies from Russia and the economic recovery from the COVID-19 crisis – a situation now compounded by the Ukraine war. This has pushed up the price of electricity, which is driven by “marginal” production capacity available from gas power plants that can be fired up at short notice to meet peak demand. France and Spain have led calls to reform the current marginal pricing system, with Madrid asking for “structural solutions” at the European level to decouple gas and electricity markets. They were backed by the leaders of Italy, Portugal and Greece, who urged the EU executive to address the “contagion effect” of high gas prices on the electricity market. The European Union is preparing an “emergency intervention and structural reform” of the European electricity market, the functioning of which has been heavily criticised by some EU Member States in the context of rapidly increasing energy prices. On 29 August, during an emergency meeting of European energy ministers in Bled, Slovenia, European Commission President Ursula Von der Leyen announced the EU’s intention to intervene in the electricity market. “Skyrocketing electricity prices are now exposing, for different reasons, the limitations of our current electricity market design,” Von der Leyen said. “It was developed under completely different circumstances and completely different purposes. That is why we are now working on an emergency intervention and structural reform of the electricity market.” Member States are increasingly calling for the EU to implement price caps on electricity. The Czech Republic, which currently holds the presidency of the EU, convened the meeting of energy ministers and said that a new extraordinary meeting will be held in Brussels on 9 September to agree on the proposed reforms. “After a weekend full of negotiations, I can announce that I am convening an extraordinary meeting of the Energy Council,” Jozef Síkela, Czech Minister of Industry and Trade, announced on Twitter. The minister spoke of the need to “fix the energy market” at the EU level. German Chancellor Olaf Scholz, during bilateral talks in Prague on 29 August, said that he would back price caps on the cost of electricity and stated that the EU would quickly reach an agreement. “We will look very carefully at what instruments we have that we can use to bring down electricity prices,” Scholz told the press. “It is not something that can happen at random, it has to work in a technical sense, but obviously what is being set now as the market price is not a real reflection of supply and demand.” Decoupling gas from electricity prices The Czechs may target natural gas, which is used extensively for electricity production and has surged in price due to Russian energy warfare, setting price caps on gas used exclusively for electricity production. A draft internal document viewed by financial publication Bloomberg at the start of the year suggests that the commission is considering capping gas prices in the case that Russia cuts off supply or prices become unbearable. “In general, I can perhaps say that, for example, decoupling electricity prices from the cost of gas is one of the paths we can consider,” Scholz noted.