Following the Russian aggression and invasion of Ukraine, the EU’s energy market has been affected by dire consequences such as raising costs of gas and electricity. On top of adopting short-term measures, in the 2023 Working Programme, the European Commission pledged to introduce more permanent reforms to the current energy market by the end of the first quarter of 2023. The currently most debated measures are (I) the Europeanisation of the ‘Iberian model’, and (II) a pan-European ‘Greek model’, which would fundamentally change how prices are set at the market. The authors assess such models against their impact on five variables, as to turn the spotlight on respective benefits and drawbacks that each model presents regarding:
- The merit order
- The buildout of renewables
- Demand-side signals
- Cross-border flows
- Consumer participation and vulnerable consumers
Given the context, the report argues in favour of future-proofing the merit-order based market design. It argues that it is crucial to ensure a market-based buildout of renewables and to maximise the efficiency of cross-border flows within Europe, as it would be extremely costly for any member state to ensure security supply on its own. In view of the proposal to be issued by the European Commission, EPICO KlimaInnovation and Aurora Energy Research suggest a reformed market-design that builds on the success of the past decades, instead of undoing it.
Read here and download our Report.
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