The Energy Ministers of the European Union Member States will meet in Brussels on 9 September for an extraordinary meeting, Jozef Síkela, the Czech Minister of Industry and Trade, whose country currently holds the rotating Presidency of the EU Council, announced on Twitter.
While the agenda for the meeting is not yet known, the ministers are expected to discuss measures to deal with soaring energy prices exacerbated by the Russian invasion of Ukraine.
“We must fix the energy market”, Mr Síkela tweeted, foreshadowing a debate on reforming the EU’s electricity market.
In his view, the EU’s main task is to “separate the price of electricity from the price of gas, and thus prevent Putin from dictating to Europe prices of electricity with his shenanigans with gas supplies”.
The design of the electricity market in question
The idea of reforming the EU’s electricity market, which has been championed for months by Spain and France, is now supported by more and more Member States (Portugal, Italy, Greece, Cyprus, Belgium, Austria, etc.).
On Sunday 28 August, the Belgian Energy Minister, Tinne Van der Straeten, called for “a review of this European system of electricity price formation” and “work on a price freeze for gas” in a series of tweets, while stressing the current lack of a “link between the cost of production (of electricity) and the selling price”.
On the same day, Austrian Chancellor Karl Nehammer called on the EU to decouple retail electricity prices from gas prices.
Even the German government is reportedly working on such an option.
German Chancellor Olaf Scholz urged Member States to agree “quickly” on an electricity market reform during a press conference in Prague on Monday 29 August.
The current system “cannot be described as functional, if it leads to such high electricity prices”, the chancellor said, according to AFP.
The idea of decoupling was the subject of a written proposal by Greece, which was supported by Italy, Cyprus, France and Spain on Tuesday 26 July at an extraordinary meeting of Energy Ministers. Germany was not very enthusiastic, while Luxembourg and Denmark expressed reluctance (see EUROPE 13001/3).
Commission announces “emergency intervention”
On the part of the European Commission, the President of the institution, Ursula von der Leyen, indicated that her services were currently working on “an emergency intervention and structural reform of the electricity market”, on Monday 29 August, during a speech at the Bled Strategic Forum.
In her view, soaring electricity prices “are now exposing the limitations of our current electricity market design”.
It remains to be seen when the Commission will present its proposals.
On 26 July, the Commissioner for Energy, Kadri Simson, said that a legislative proposal to overhaul the EU electricity market will not be ready until next year (see EUROPE 13001/3). It will be preceded by the publication of an impact assessment in October.
In view of the urgency of the current situation, the institution may nevertheless be forced to present solutions to be implemented quickly, such as a cap on the price of gas. Mr Síkela said he expected a concrete proposal to this effect this week.
Sceptical experts
While the idea of reforming the EU electricity market seems to be gaining support among Member States, some experts remain highly sceptical about the benefits of such an option.
Lion Hirth, Professor of Energy Policy at Hertie School and Director of the consultancy group Neon Neue Energieökonomik, points out in particular that the marginal pricing on which the EU electricity market is based is not unique to that market.
“Oil, gas, copper, milk, solar panels - they are all subject to marginal pricing. If you conclude that this market system does not work anymore, you probably should change all these markets as well”, he wrote on Twitter.
He adds that marginal pricing is not “an artificial rule that some institution or person came up with”, but is “the natural way prices emerge in free markets”.
He concludes: “if you want to change this principle, you must force people to change their behaviour, e.g. through taxes, subsidies or bans”.
The emergency meeting of the EU Energy Ministers should instead be dedicated to “radical and short-term measures to drastically reduce gas and electricity consumption”, he said. (Original version in French by Damien Genicot)