EU Set to Reform Power Market to Protect Consumers from Price Hikes
- January 24, 2023
- Posted by: Quatro Strategies
- Category: Legislation
The European Commission said on Monday its upcoming proposal to reform the power market will aim to better protect consumers from short-term energy bill hikes. The EU is attempting to avoid a repeat of last year, when Russia’s gas supply cuts drove European electricity prices to record levels, causing household electricity bills to skyrocket and forcing some industries to shut down. The commission has laid out a number of plans to overhaul the way power plants sell electricity after a public consultation on Monday, as part of its market reform proposal in March.
“We need to make the electricity market design fit for the future, allowing it to deliver the benefits of affordable clean energy to everyone,” EU energy commissioner Simson said.
The EU proposal will aim to expand Europe’s use of long-term contracts that provide power plants with a fixed price for their electricity – “contracts for difference” (CfD) and power purchase agreements (PPA), the Commission said.
It added that these types of contracts would create a buffer between energy consumers and volatile power prices in short-term energy markets, resulting in more stable energy bills for households and industries.
For the time being, the Commission avoided pitfalls regarding price caps, which some market participants have been opposing.
Stability for consumers could be achieved through introducing specific EU rules for CfDs and leaving it up to national governments to decide to use them, or requiring new power plants that receive state support to sign CfDs, the Commission said.
The Commission also said it was possible to allow national governments to impose CfDs on certain existing power plants, bıt warned that it could create uncertainty in much-needed investment in renewable energy projects.
France and Spain have already called for an expansion of CfDs for renewable and nuclear power generation.
EU countries and lawmakers will negotiate the final power market reforms.
The Commission also hinted a range of other changes, such as making it easier for consumers to choose fixed-price power contracts to reduce their exposure to short-term price spikes, or extending a temporary EU measure which claws back windfall revenue from non-gas generators.
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