The European Commission is expected to propose a reform of the European electricity market on Thursday 16 March: - allowing households and businesses to enter into longer-term supply contracts to protect them from excessive short-term price volatility due to high fossil fuel prices; - stimulating investment in clean energy electricity generation, which is expected to drive down prices due to the low operational costs of renewable and low carbon energy.
In the autumn of 2022, emergency measures taken at European level to bring down energy prices exacerbated by Russian military aggression in Ukraine, such as gas price capping or energy savings, have “certainly helped Member States cope with the immediate consequences of the crisis”, but “the crisis has also shown how exposed consumers and industries are and our lack of resilience to increases in energy prices”, the EU institution notes in a draft version of the reform proposal, a copy of which was made available to EUROPE.
To protect consumers from price volatility, the proposal will provide for the right to fixed price contracts as well as dynamic price contracts, the right to multiple contracts and clearer and better contractual information.
In the event of a crisis, the Commission could declare, for up to one year, that the Union is in an exceptional situation, based on criteria such as a surge in retail prices lasting more than 6 months (Article 66). Such circumstances would allow Member States to intervene directly in the setting of prices charged to households and SMEs.
Suppliers will also have to do more to protect themselves against high price spikes by making greater use of forward contracts with producers (locking in future prices). Member States will also have to put in place a supplier of last resort regime.
In addition, the reform will aim to stimulate investment in renewable energy in order to triple its deployment. According to the Commission, improving the markets for long-term contracts (‘power purchase agreements’ and ‘contracts for difference’) will contribute to this objective, both allowing consumers to benefit from stable prices and renewable energy suppliers to obtain predictable revenues and reduce their financial risk.
These measures will create “a virtuous circle, in which stable revenues drive down costs and stimulate demand for renewable energy”, the EU institution anticipates.
Other provisions to stimulate electricity production from renewables will include the possibility of making Member States’ electricity systems more flexible in terms of production and storage, as well as increased transparency regarding grid connection capacity.
See the draft regulation: https://aeur.eu/f/5o2 (Original version in French by Mathieu Bion and Solenn Paulic)