The unprovoked Russian war on Ukraine caused a 7-fold increase of gas prices in Europe. The European Union responded through REPowerEU, a plan to reduce energy ties with Russia. In less than a year, the role of Russian gas in the EU’s energy mix fell from around 40% to around 8%. This translated in resorting to diversify the EU’s energy supply, and an inherent increase of gas price.
The EU’s electricity market, based on the merit order, implies that the costliest technology (i.e. currently gas) sets the price of electricity. The European Council adopted several short-term measures intervening in the energy market, to try to decrease the cost of gas, hence of electricity, for example by capping windfall profits of ‘cheaper’ technologies, such as wind powerplants, and increase energy storage targets.
The measures taken to this date, however, do not address the inherent issue with the current energy market design. As member states seek to achieve carbon neutrality by 2050, the European energy market design needs to undergo changes as to ensure a market-based uptake of renewables and avoid potential future scenarios similar to the current one.
The European Commission’s 2023 working programme committed to deliver a proposal reforming the electricity market design in the first quarter of 2023, and the rotating Swedish Presidency of the Council prioritised the issue in its programme for the first half of the year.
In light of these factors, how to keep energy costs low for consumers, while allowing the market to increase the share of renewables within the EU’s energy mix?
On 29 November 2022, EPICO KlimaInnovation was hosted by Member of the European Parliament (MEP) Markus Pieper and MEP Siegfried Mureșan to present potential models that the future European energy market design might take. EPICO CEO Dr. Bernd Weber, and EPICO’s Associated Senior Advisor Dr. Klaus-Dieter Borchardt gave a presentation focused on assessing the Europeanisation of the Greek and Iberian model, and evaluating a reform of the energy market, while keeping the merit order intact.
The audience, composed of German-speaking MEPs, group advisors and policy assistants, further discussed with EPICO the potential future shape of the European electricity market design.
Download the full presentation here.