Electricity market reform: what’s not in the proposal
(EurActiv, 15 May 2023) Caution is needed to prevent the EU’s ongoing electricity market reform from creating regulatory uncertainty and hindering future investment in renewables, argue Christopher Jones and Klaus-Dieter Borchardt.
Christopher Jones is professor at the Florence School of Regulation and former Deputy Director-General for Energy at the European Commission. Klaus-Dieter Borchardt is professor at the Copenhagen Business School, visiting fellow at the Oxford Institute of Energy Affairs, and former Deputy Director-General for Energy at the European Commission.
The Commission’s proposal to reform the EU’s electricity market has a number of key objectives:
- making electricity bills less dependent on fossil fuel prices by incentivising longer-term contracts, in particular boosting the market for power purchase agreements (PPAs), stabilizing the prices of electricity notably by requiring the use of two-way contracts for difference (CfDs) for new investments in renewable energy and nuclear generation where public funding is needed, and by improving forward electricity markets.
- accelerating the deployment of renewables by further facilitating their integration in the electricity system and improving conditions for the use of flexibility solutions such as demand response, storage and low-carbon sources.
- protecting consumers from the price volatility of fossil fuels by empowering consumers with greater contract choice and more direct access to renewable energy, and
- providing secure, stable investment conditions for renewable and low-carbon energy developers by bringing down risk and capital costs by facilitating access to longer-term contracts for developers (both state-supported CfDs and private PPAs).
It is a balanced proposal that keeps competition and trade at the heart of the Internal Electricity Market, which has served the EU well for more than three decades, providing security, driving decarbonisation and affordable and competitive prices.
EurActiv, 15 May 2023: Electricity market reform: what’s not in the proposal