In a publication published on 25 April, the Bruegel think tank sets out several options for setting a fair price for electricity, taking particular account of the fact that fixed costs will increase as the transition to a clean electricity system progresses.
Given that the high cost of electricity in the EU can only be structurally reduced through decarbonisation and further integration of the European electricity system, Bruegel believes that policymakers have little choice in the short term. They can redistribute system costs by shifting components from one consumer to another, or reduce energy taxation, “implicitly shifting costs to the taxpayer”.
Among other things, the note argues that policy interventions in the electricity system should not aim “to achieve broader economic objectives at the expense of energy-policy goals”.
It recommends the creation of transparent analytical tools to assess the distributional effects of electricity policy interventions, drawing lessons from the energy crisis and developing EU-wide guidelines for electricity cost recovery and pricing, as well as providing national governments with a “policy toolbox [...] for electricity price reduction policy”.
Options proposed to governments could include taxing energy at the legal minimum, reforming network tariffs to better reflect system costs, or encouraging greater competition in the retail market and switching suppliers.
To see the Bruegel publication: https://aeur.eu/f/glb (Original version in French by Pauline Denys)