Adjusting the Electricity Market for a Net-Zero Future
23 May 2023
The trend towards electrification for industrial and societal activities is intensifying. This shift has the potential to reduce greenhouse gas emissions, improve energy efficiency, and promote a more sustainable future, while creating new opportunities for innovation and economic growth. However, the transition to electrification, which is core to the net-zero transformation, also has a profound impact on the way we use energy.
In recent years, EU electricity prices have exceeded feasible levels significantly, causing enormous challenges for both industrial and private energy users. Managing these challenges will be key to ensuring a stable and competitive electricity market while continuing to encourage decarbonisation and energy savings.
"The EU needs to take decisive action to address the challenges posed by the transition to electrification. It is vital to adjust the electricity market to ensure that prices remain stable and competitive while continuing to encourage decarbonisation and energy savings," said Daniel Wennick, Orgalim Policy Director.
The EU needs to take decisive action to address the challenges posed by the transition to electrification.
The European Commission has proposed a revision of the internal electricity market rules, which maintains the market logic that underpinned the past success of the common electricity market while introducing the necessary adjustments to ensure that prices remain predictable and sustainable. The proposed measures include the deployment of Power Purchasing Agreements (PPAs) and Contracts for Difference (CfDs).
However, certain concerns remain, such as the proposed crisis mechanism, which is vague and may harm the stability and predictability needed for investing in renewable and low-carbon energy. The European Parliament and the Council will now work together with the European Commission to conclude this reform swiftly, before the end of the legislative period in 2024, to ensure a stable and competitive electricity market that supports decarbonisation and energy savings.
According to Orgalim’s Energy Crisis Task Force, to fully deliver on its ambitions, certain adjustments must be made to the Commission proposal, notably to ensure all businesses – regardless of their size – can benefit from it. "It is important that both SMEs and companies above the SME threshold are included in the suggested policy framework deployed," commented Wennick.
The shift towards electrification has significant potential benefits for Europe's energy transition. However, managing the impact on the electricity market is crucial to ensure that prices remain competitive and sustainable while promoting a more sustainable future. The proposed measures by the European Commission are a step in the right direction, but more adjustments are needed to ensure the success of the energy transition and the achievement of net-zero emissions.
More about Orgalim Position on revised Electricity Market Design here.