Von der Leyen calls for ’emergency intervention’ in electricity market

The worsening vitality disaster besieging Europe has laid naked the “limitations” of the electrical energy market and requires an “emergency intervention” to deliver down hovering costs, Ursula von der Leyen has mentioned.

“The skyrocketing electrical energy costs are actually exposing, for various causes, the restrictions of our present electrical energy market design,” the European Fee president mentioned on Monday, whereas addressing the Bled Strategic Discussion board in Slovenia.

“[The market] was developed underneath fully completely different circumstances and for fully completely different functions. It’s now not match for function.

“That’s the reason we, the Fee, are actually engaged on an emergency intervention and a structural reform of the electrical energy market. We want a brand new market mannequin for electrical energy that basically features and brings us again into steadiness.”

Right this moment, the EU’s wholesale electrical energy market works on the idea of marginal pricing, also referred to as “pay-as-clear market”.

Below this method, all electrical energy producers – from fossils fuels to wind and photo voltaic – bid into the market and provide energy in keeping with their manufacturing prices. The bidding begins from the most affordable sources – the renewables – and finishes with the most costly one – often fuel.

Since most EU nations nonetheless depend on fossil fuels to satisfy all their vitality calls for, the ultimate value of electrical energy is usually set by the worth of fuel. If fuel turns into costlier, electrical energy payments inevitably go up, even when clear, cheaper sources additionally contribute to the entire vitality provide.

The system was initially praised for enhancing transparency and selling the change to inexperienced sources, however since late 2021, it has come underneath intense criticism.

Russia’s invasion of Ukraine has introduced the market design to its most excessive limits, fuelling requires state intervention and significant reforms.

Spain, Portugal, Greece, France, Italy and Belgium are amongst these calling for a “decoupling” of fuel and electrical energy costs to place an finish to the contagion impact.

The Czech Presidency of the EU Council has already convened a rare assembly of vitality ministers, scheduled to happen on 9 September.

President von der Leyen didn’t unveil additional particulars in her speech, which touched upon a wider vary of matters, together with rule of regulation, local weather change, the financial restoration and EU enlargement.

Her feedback come within the midst of a record-breaking spike in fuel costs, pushed by hypothesis round Gazprom, Russia’s state-controlled vitality large.

The multinational has repeatedly restricted and even shut down fuel flows to a number of EU nations. Deliveries throughout the Nord Stream 1 pipeline are at 20% of its day by day capability.

On Friday, future fuel costs on the Title Switch Facility (TTF), the continent’s main buying and selling hub, reached €339 per megawatt-hour, a stratospheric determine in comparison with the €27 mark set a yr in the past.

The seemingly unstoppable upward pattern is elevating fears of chapter for firms and vitality poverty for households forward of the winter season, when heating consumption is anticipated to extend drastically.

In late July, the EU determined to determine a voluntary plan to scale back fuel demand by 15% between now and subsequent spring with the hopes of in some way cushioning the impression from the Kremlin’s vitality manipulation.