The Commission is currently preparing a review of EU electricity market rules, arguing that the EU power market “does not work anymore” and needs to be adapted to the “new realities of dominant renewables” and higher gas prices.
European Commission President Ursula von der Leyen has made the reform a priority, with a concrete proposal expected on 14 March.
But while France and Spain are pushing for reform, Germany has decided to defend the status quo.
According to Berlin, the spike in electricity prices seen in 2022 was the result of extraordinary circumstances caused by falling gas supplies from Russia, not by faulty market design.
“Europe has one of the best functioning electricity markets in the world,” said Robert Habeck, Germany’s minister of economy and climate action.
“We must preserve the positive achievements while making the market fit for the future,” he added on Monday (20 February) during an event in Berlin to mark the beginning of a nation-wide consultation on the reform.
In a speech to energy CEOs, experts and think-tankers in Berlin, Habeck highlighted Germany’s role as the “heart chamber” of the European electricity market before laying out the country’s priorities for reform.
Priority number one for the new market design will be to ensure that there are sufficient incentives to invest in renewables. “How will renewables be financed?” Habeck asked, adding that ensuring “low prices” are passed through to consumers will be paramount for Germany.
Second, Berlin will aim to ensure sufficient flexible power generation capacity is available at all times to ensure back-up for intermittent renewable energies. Here, plants burning hydrogen and gas are expected to play a key role, he indicated, saying Germany would need “about 20%” of the country’s power generation capacity to “burn molecules”.
Third, the design should work towards achieving greater flexibility on the electricity demand side, a challenge Habeck described as “teaching the elephant to dance”. Fourth, electricity production should increasingly be tackled locally, he said.
Germany, a massive country, is made up of a single electricity pricing zone, where southerners in Bavaria often consume wind power produced in the North Sea.
Other big countries like Sweden have at least six pricing zones where bidders buy and sell on the day-ahead market to set prices within the zone. But in Germany, splitting the bidding zones could have far-reaching economic repercussions on the industrious south, and has been resisted until now for political reasons.
So, the German government must find a way to ensure electricity is produced locally, otherwise it will be forced to split the bidding zones, as proposed by the EU agency ACER in 2022.
“The European Commission has announced that it will itself submit proposals on electricity price zones, in the year 2024 at the latest,” Habeck warned, pointing to the urgency of moving forward on this matter.
These challenges will be debated by experts on a stakeholder platform for a “climate neutral electricity system” which will begin work immediately. Their first conclusions are expected in the summer of 2023, followed by a winter report.
At the end of this process, Germany will adopt its official stance on the EU’s electricity market reform.
However, this could be too late for Brussels and pro-reform countries like France, Spain and Greece, which all want the reform to be concluded before the European elections in spring next year.
Source : Euractiv
