Seven countries oppose EU’s overhaul of electricity market


Seven countries oppose EU’s overhaul of electricity market


Denmark, Germany, the Netherlands, Estonia, Finland, Luxembourg, and Latvia have warned Brussels not to make major changes to the European Union's power market in response to the energy crisis, calling instead for minor alterations.

The European Commission has held public consultations on its proposed energy market reform, which intends to reduce the EU's electricity pricing' reliance on the price of fossil fuels, particularly gas. It plans to present its proposal in March.

The reform was judged necessary following Russia-Ukraine war and Moscow's decision to halt nearly all gas exports to the EU in retaliation for sanctions, resulting in a price surge that put European consumers and businesses under great economic duress.

This is because the price of energy in the EU is now determined by the most expensive power source used to generate it, which is typically fossil fuels, particularly gas.

In a letter, the seven countries, led by Denmark, stated that Europe's current market design has encouraged years of reduced electricity prices, assisted in the expansion of renewable energy, and ensured that enough power was supplied to meet demand and avoid shortages.

"We must resist the temptation to kill the golden goose, that our single market for electricity has been in the last decade," said Denmark's energy minister, Lars Aagaard.

The countries agreed that there was potential for improvement, particularly in light of last year's skyrocketing power costs. However, any reforms must ensure that the market continues to function and that significant investment in renewable energy is encouraged, they stressed.

"Any reform going beyond targeted adjustments to the existing framework should be underpinned by an in-depth impact assessment and should not be adopted in crisis mode," said the letter to the Commission.

Other countries, such as Spain and France, are seeking more radical transformation. To try to reduce price surges, Spain has proposed a shift to longer-term, fixed-price contracts for power plants.

The seven countries stated in their letter that schemes such as contracts for difference (CfDs) could play a role, but they must be voluntary, focus on new renewable power, and respond to market conditions.

Electricity industry lobbying group Eurelectric has also warned against making CfDs mandatory, which it says could undermine competition in the power market and deter investors.

The seven countries approved an idea floated by the Commission to make it easier for customers to choose between variable and fixed-price power contracts in their letter.

But they pushed back on another Commission suggestion to extend a temporary EU measure which claws back windfall revenue from non-gas generators.

"That could compromise investors' confidence in the needed investments," the countries stated in the letter, citing EU estimates that hundreds of billions of euros in renewable energy investments are required each year to help countries transition away from Russian fossil fuels.














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