Brussels rejects Ribera’s proposal to reform the electricity market and points to taxes and network costs

“We are of course available to discuss with the Spanish authorities the compatibility with EU law of any measure they may propose. Both the executive vice president Frans Timmermans like the Energy Commissioner, Kadri Simson, have recently spoken with Vice President Ribera and have discussed in these meetings the current situation in Spain “, a community official explains to EL ESPAÑOL.

Ribera sent a letter to the Community Executive at the end of July in which he demanded to modify the current marginalist design of the European electricity market, which means that it is the most expensive technology (currently gas) that sets the wholesale price of electricity. “Increasingly expensive fossil fuels cannot weigh down or distort the benefits of the energy transition, “says Ribera.

“We want to ensure that the CO2 cost signal remains a central vector to guide investment decisions. But we must prevent it from becoming an unaffordable and unfair bill for families and efficient industry“, claimed the fourth vice president.

However, Ribera’s arguments have not convinced Ursula von der Leyen’s Commission, which continues to defend the benefits of the European electricity market.

“The high prices observed are the result of a combination of factors including the recovery of economic activity and a high seasonal demand attributable to hot weather conditions “, says the Energy Commissioner in a parliamentary response to the MEP for Citizens José Ramón Bauzá.

“This increase in demand, together with the increase in the prices of the emissions trading scheme and the price of gas, mainly due to the increase in demand for liquefied natural gas from Asia (among other factors), has had an impact on wholesale electricity prices in Europe, “says Simson.

“This can have an effect on electricity bills. However, due to the increasing penetration of renewables, contracts in which the price of electricity follows the wholesale price tend to be cheaper for consumers throughout the year“continues the Energy Commissioner. In other words, Brussels considers that the current record prices for electricity are a temporary phenomenon and does not see the need to change the marginalist system.

In particular, the Community Executive reject any price intervention like the one that United We can claim in Spain. It considers that it is an expensive and ineffective tool that enshrines the dominance of the market by the large traditional operators and makes it difficult for new technologies and companies to enter the market.

Brussels defends the marginalist system of fixing electricity prices because it guarantees that all electricity producers (including renewables) receive the same price for the same product, electricity. In addition, it keeps electricity costs low for consumers throughout Europe as different energies enter the market in order of price, starting with the cheapest.

Spain, energy island in the EU

“We see more and more in the EU that renewable energies are setting the price and replacing power generation with fossil fuels for a few days or hours during the day “, highlight community sources. The problem is when renewables do not cover all the demand and it is gas, much more expensive, which ends up setting the wholesale price The Commission responds that these rules also create price signals to drive investments in new and flexible technologies in order to accelerate the transition to climate neutrality.

The common electricity market, defends the Community Executive, also allows electricity to flow from areas with lower prices to those with higher prices. Nevertheless, Spain remains an energy island in the EU since your level of 5% interconnection with the rest of the European electricity system with respect to installed generation power, a figure still very far from the target set by the European Union, to reach 15% by 2030 for each country.

Wholesale electricity prices in the EU this Tuesday, in euros per megawatt hour (Energylive)

Wholesale electricity prices in the EU this Tuesday, in euros per megawatt hour (Energylive)

In any case, in the current situation of skyrocketing prices, Brussels says the priority must be to protect households at risk of energy poverty. Something that does allow EU legislation, with measures such as public interventions in setting prices for the supply of electricity to vulnerable domestic customers under certain conditions.

“EU legislation allows states to apply safeguards for vulnerable or energy-poor households.”

However, “it is important to note that the electricity bill not only reflects the price of electricity production but also the transportation and distribution costs (network costs), as well as the taxes and levies “.

“Therefore, a broadly efficient electricity market design is the best way to keep total system costs – and electricity bills – as low as possible,” he concludes.

Leave a Comment