Consultation on the Revision of the EU’s Electricity Market Design – EUGINE Contribution
13 February 2023
On the 23 of January 2023 the European Commission launched a public consultation seeking feedback on different options to “make electricity bills more independent from the short-term cost of fossil fuels”, “drive renewable investments”, promote “alternatives to gas to keep the electricity system in balance” and gather views on “lessons learned from short term market interventions”, options for “better consumer empowerment and protection” and “stronger protection against market manipulation”.
As the association representing engine power plant manufacturers, EUGINE supports the decarbonisation of the European energy system and an integrated European energy market that ensures affordable, secure, and carbon-free energy. We stand for a market that supports flexible solutions that help balance energy supply and demand in the short, medium and long term.
While we fully understand and support the need to protect consumers from excessive price peaks, drive renewable investments and deter market manipulation, we regret that the role of gas-fired generation in the medium and long-term is not adequately taken into account.
The current energy crisis was created by the low availability of different energy sources and technologies, combining in a perfect storm. As the electricity system decarbonises, gas power plants running on renewable fuels will continue to be an important part of the solution to the energy “trilemma” of ensuring reliable, affordable and decarbonised energy. Any review that would overlook this fact risks endangering the secure functioning of the European electricity market and will lead to suboptimal economic outcomes both for consumers and for businesses.
Our key messages:
- PPAs are an efficient way to mitigate the impact of short-term markets on the price of electricity paid by the consumer, but they should not become a mandatory instrument.
- Forward hedging is as an efficient way to mitigate exposure to short-term volatility for consumers, but longer-term contracts are needed to drive investment.
- Two-way contracts for difference or similar arrangements could be an efficient way to mitigate the impact of short-term markets on the price of electricity, but they should not become a mandatory instrument.
- The revenue limitation of inframarginal generators currently in place should not be maintained beyond the planned expiry date, especially in what concerns biogas plants.
- Flexibility is not a single defined capability, but flexibility needs to be met in short, medium and long-term. This requires different technological solutions.
- Remunerating operators of assets for keeping flexible capacities (and linked capabilities) available through capacity remuneration mechanisms (CRMs) should be the way forward.
