Watch: Here’s how the price of electricity is set in the EU

Electrical energy costs have shot up within the European Union in latest months, which has led to calls to reform the best way they’re set.

At the moment, the EU’s wholesale market is a system of marginal pricing. That implies that all electrical energy turbines get the identical value for the ability they’re promoting at a given second.

However the value of electrical energy varies extensively relying on the power supply used to generate it: the most affordable being renewable power sources whereas fossil fuels are rather more costly.

Nationwide electrical energy producers make their bids in the marketplace and the bidding goes from the most affordable to the costliest power supply with all people acquiring the worth of the final producer from which electrical energy was purchased, in keeping with the European Fee.

Proponents say this mannequin is the fairest and is cheaper for customers in the long term.

However as fossil fuels (from petroleum merchandise to coal and pure fuel) accounted for practically 70% of the EU’s power combine in 2020 and with most of it imported from third nations, it means the bloc is very susceptible to cost fluctuations.

The reopening of the worldwide economic system from COVID-19 lockdowns, which led to a surge in power demand worldwide, and Russia’s conflict in Ukraine, which prompted Moscow to curb fuel flows to Europe in retaliation for sanctions, have led to a dramatic rise in fossil fuels value.

Rising inflation and electrical energy payments have led to protests throughout Europe, with some leaders now advocating for the worth of electrical energy to be decoupled from fuel to be able to ease the burden on households and companies.