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Wednesday, March 22, 2023

Will the reform of the European Commission solve the problem of high electricity prices in Germany

By reforming the electricity market, the European Commission wants to prevent price increases for consumers. According to the department’s proposal, it is necessary to promote the expansion of use and actively encourage long-term contracts for the production of electricity from renewable sources and nuclear energy.

Renewable energy sources are the ticket to energy sovereignty, said European Commission Vice-President Frans Timmermans. “We need to update the market structure so that this transition happens as quickly as possible and consumers can reap the benefits of lower renewable energy costs.”

In order to protect end users from sudden price fluctuations, the European Commission offers, for example, the right to fixed or dynamic price contracts. This will allow consumers to choose whether they want to take advantage of price fluctuations.

“Consumers are at the center of this reform,” said Ursula von der Leyen, President of the European Commission. She said she was confident a decision could be made before the European elections in May next year. Thanks to the reform, “the impact of gas prices on the price of electricity will be significantly reduced”, said von der Leyen. In turn, “consumers will be able to take advantage of cheaper renewable energy sources.”

The evolution of the electricity market has been discussed for several months, especially since the price of electricity also depends on the price of gas. It has increased sharply due to the conflict in Ukraine. However, according to the Commission’s proposals, there will be no serious reform decoupling the price of electricity from the price of gas.

Minimum electricity price

In order to encourage investment in renewable energy sources, the Commission calls on EU states to guarantee electricity producers a minimum price for electricity when making new investments. This applies to investments in all renewable energy sources and in nuclear energy. State guarantees for power purchase agreements between energy producers and commercial consumers should also ensure long-term price stability and give the producer the security needed to make an investment decision.

Projects can still be revised. The plans must also be discussed and adopted by EU states and the European Parliament. States such as Spain and France have come out in favor of stronger intervention to stabilize prices. Other countries, including Germany and Denmark, have warned against scaring off investors with too many changes.

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