What has been a year marked by Russia’s military invasion of Ukraine led to an energy crisis in the EU that served as a catalyst for Brussels to propose a reform of the electricity market at a community level. Thus, the European Commission presented this Tuesday a proposal for industrial companies to provide users with contracts with fixed prices, in addition to those with dynamic prices, as well as with measures to promote long-term contracts to promote production with renewals. guarantee a firm price.
“This reform includes a number of measures to improve investment conditions in renewables,” said the Energy Commissioner, Kadri Simson in a press conference, as consumers were exposed to prices linked to dynamic contracts. As he explained, the proposal is based on three pillars: making the market more absolute for short-term users, promoting long-term renewable contracts and promoting system flexibility through storage and response systems.
The approach of the European Commission introduces measures to strengthen long-term contracts to produce energy with technologies that do not use fossil fuels, in parallel to introduce more flexible solutions in the system to reduce energy production from gas. Thus, Brussels proposed that the contracting countries be encouraged to differentiate the inframargin renewals. A list that covers technologies such as solar, wind, geothermal, hydraulics without storage and nuclear.
On the other hand, the Community Executive proposes to encourage long-term energy purchase contracts (PPAs–Purchasing Power), so that companies have access to energy at stable prices. It also suggests that consumers with self-consumption systems can share the electricity generated with their neighbors.
In addition, in order to provide industry producers with a stable income, the European Commission has agreed to public support for new inframarginal technologies through contracts for the difference in two parts, so that the Member States consume the surplus benefits. At the same time, the reform will release liquidity into the long-term contract market, that is, the futures market.
The European Commission has proposed that electricity companies provide consumers with different types of contracts, as well as clear information about the implications, advantages and disadvantages of each one so that they can make decisions. The fact is that they have the option to offer contracts with fixed prices, so that exposure to price volatility in the intraday market is avoided.
“The predominance of the short-term market has amplified the effect of increasing gas prices and is the source of many problems in this crisis,” explained the Commissioner of Energy, who added that consumers of energy prices are exposed in the Lupo market; which dictated the generation of gas plants, without being able to benefit from the participation of the growing innovations.
Thus, in order to increase the flexibility of the electricity production system, countries may introduce reserve systems, especially for storage and demand response. Operators will also be able to promote demand reduction during peak hours.
The proposal seeks to triple production from clean energy by 2030, although the aftertaste is somewhat disappointing. Since what was articulated as a profound reform did not reach the pillars of the operation of the electricity market as such. Nor should he propose any measure to be taken, but all propositions articulated in the form of recommendations. The position, that of Brussels, with which it seems to open the door to the reform of a broad consensus and that it responds to the different needs of the national community, when the electrical system is constructed with twenty-seven diversifications.
For the time being, the Community Executive is looking more at putting in place formulas, so that consumers will not be affected by the rise in energy prices, avoiding market manipulations, at the same time that it intends to continue to promote penetration. innovations in the market community and their profitability guarantee.
With this proposal, the Community Executive is trying to give a boost to renewables in the community market and to eliminate the dependence of energy production from gas. The decision, which became necessary with the threat of Russia after the invasion of Ukraine and the high dependence of the Community market on gas supplies from Russia.
