Electricity prices: European regulators are calming the heat of Paris

La France, comme l'Espagne, plaide pour une refonte de la fixation des prix de l'électricité, la considérant inflationniste et injuste.

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Posted April 29, 2022, 1:31 pmUpdated April 29, 2022, 4:17 p.m.

Rising prices and war-related uncertainties in Ukraine do not justify a radical overhaul of the European electricity market. This is the clear message sent by the European Energy Regulatory Authority (Acer) in a report to the European Commission on Friday. It comes to feed the concerns ahead of a new meeting of the Energy Ministers of the Twenty-seventh, Tuesday, and the presentation, in mid-May, of Europe’s “RepowerEU” plan to exit its dependence on Russian gas. .

This European market is based on a model where prices are a function of the cost of the most expensive unit of energy required to meet demand. As of this winter, Paris and Madrid have denounced the almost mechanical connection between the soaring gas price and the electricity that follows and fuels inflation and social tensions. Paris would like each state’s energy mix to be taken into account in order to make the most of the low cost of producing its nuclear power. But Berlin, Rome and others are very reluctant to reconsider a market that has also proven its virtues for thirty years.

Supply

Acer is going in their direction. The current wholesale market planning “guarantees an efficient and secure supply of electricity under relatively” normal “market conditions” (this is why it exists) and “deserves to be maintained”, the European Agency writes. He points out that its operation has helped to mitigate the effects of the energy crisis, allowing, for example, Belgium and France to import more electricity during failures at their nuclear power plants.

There is no doubt that Acer will break the link between the price of gas and electricity in order to move towards an average price framework: EU market and global competition, undermining the benefits achieved so far and possibly increasing the overall cost of the future energy transition. ” “We have a huge opportunity to take advantage of our unique, complete model […] for the energy transition and for greater independence […] “It would be a shame and counterproductive if the current pressures somehow overturned that,” said Acer CEO Christian Zinglersen.

Green transition

The report acknowledges, however, that the current market environment “is not designed for the ’emergency’ state of the EU”. It is therefore opening the door to measures to alleviate the poorest consumers, including the taxation of energy companies’ surplus profits, a path that has been carefully considered by states.

Above all, however, he emphasized that such efforts must remain temporary, targeted and supervised, and called on the Union to address the “roots” of the problem as a matter of priority – increasing Russian gas – by looking for other sources of supply. betting on other fuels, boosting investment in renewable energy and increasing energy efficiency are all avenues for the future RepowerEU project. Incidentally, Acer is very skeptical of Spain’s proposal for a cap on the selling price of natural gas in Europe: the report says this would run counter to ongoing efforts to persuade liquefied natural gas (LNG) producers to boost deliveries. in the Old Continent.

Safety valve

Trying to learn the first lessons from the current difficulties, Acer is finally paving the way for possible safeguards to deal with future price shocks. A first step, already in place in Italy and Ireland, would be to see a public entity purchase long-term hedge funds on behalf of consumer groups, a way of transferring risk from the latter to electricity producers.

The report also calls on Member States to consider a “temporary relief valve”. Inspired by measures in force in Texas or Australia, this mechanism would be to limit or freeze prices in pre-defined emergencies. According to Acer, the “risk” associated with such interference will be “partially mitigated by the benefit of regulatory stability”.

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