The rise in natural gas prices – one of the blows from the Russian invasion of Ukraine and the subsequent curtailment of supplies to Europe – and the subsequent rise in electricity prices is creating a growing belief among political leaders that the current market structure is not is now fit for purpose. “Energy prices are breaking record after record. The consequences for households and companies are unsustainable,” European Commission President Ursula von der Leyen said Tuesday at the Baltic Sea Summit in Denmark. “We have to face it – together and urgently,” he said as he joined politicians from eight countries bordering the Baltic Sea. That boosts the hopes of long-time skeptics of the EU’s electricity market, which sets prices according to a so-called merit order, with the last inflow needed to balance daily demand setting the price for the entire market. This has recently been very expensive gas. “The proposals we are making to change the price-setting mechanism are falling on increasingly fertile ground,” Polish Prime Minister Mateusz Morawiecki said at the summit. He said he had spoken with the leaders of Denmark, Finland and Estonia, “and all three agree that we really need to bring about a change” that would free the price of energy from dependence on Russian gas. Faced with concerns that Russia will cut off its already reduced gas flows this winter, the EU is rapidly building up its storage — now at 80%, the level planned for November 1. This calmed prices down a bit. One-year German electricity contracts fell to 625 euros per megawatt hour on Tuesday from a high of more than 1,000 euros per MWh on Monday. Dutch TTF natural gas futures, the European benchmark, fell to 250 euros per MWh on Tuesday from a high of 339 euros per MWh on Sunday.
Weighing options
The reforms are under discussion at an emergency summit of EU energy ministers next week. What is not yet clear is how a change in energy markets would work. Any short-term intervention is likely to take the form of some sort of price cap and will come on top of the tangle of national measures already taken by EU countries, said Cillian O’Donoghue, policy director at Eurelectric, a trade association. representing 3,500 European utilities. “Gas prices play a major role in the price of electricity, and gas prices are extremely high — seven times higher than usual,” he said. “So finding an efficient way to disconnect them has some added value.” A similar system is already in place in Spain and Portugal. The two countries got Brussels to agree to a so-called Iberian exemption in June that allowed them to decouple the price of natural gas from electricity for a year, setting a maximum gas price of around 50 euros per MWh. “Iberian prices are definitely down” in the wholesale market, said Cem Bektas, energy market analyst at consultancy ICIS. However, it has seen an increase in electricity exports to France, where electricity prices are higher. This means that Spanish taxpayers – whose money is collected by the government and then redistributed to keep prices down – are effectively subsidizing power for French households. Madrid and Lisbon have allocated 8.4 billion euros for the measure. The system would work better if it covered the entire block, so there wouldn’t be this kind of leakage. Another option would be to impose a windfall tax on energy producers or utilities — something Spain, Italy, Romania and Greece have already done and an idea gaining ground in Germany — although it is causing tensions in the ruling coalition . Von der Leyen also wants to revamp the design of the electricity market in the long term — creating even more unknowns. One option, initially proposed by Greece, would split the market into renewable and fossil fuel producers. It would then set the price for renewable electricity to allow producers to benefit but less than they currently earn from natural gas prices — while keeping the rest of the market intact. Consumers would then pay an average of the two prices. While that would lower energy prices, prices would still be relatively high while natural gas also remains expensive, said Glenn Rickson, head of European energy analysis at S&P Global. It could also discourage investment in renewables by making them less profitable. Another option is a pay-as-you-bid system, where generators bid for electricity contracts that depend on their production costs — which are much lower for renewables than fossil fuels, including natural gas. But producers are likely to simply guess at the price suggested by natural gas suppliers and bid just below that, Rickson said, which again will fail to drive prices down sharply. This shows the need to tackle the “root of evil” – Europe’s dependence on fossil fuels from unreliable partners, said Eurelectric Secretary General Kristian Ruby. “We also need to focus on where the real problem is and try to deal with the fact that right now, reforming the electricity market … will not change the flow of money that is currently going to Russia,” he said. This article is part of POLITICO Pro The one-stop solution for policy professionals who combine the depth of POLITICO journalism with the power of technology Exclusively breaking scoops and ideas Customized policy information platform A high-level public affairs network
title: “Find Out How To Reform The Eu Electricity Market Politico Klmat” ShowToc: true date: “2022-11-19” author: “John Knie”
The rise in natural gas prices – one of the blows from the Russian invasion of Ukraine and the subsequent curtailment of supplies to Europe – and the subsequent rise in electricity prices is creating a growing belief among political leaders that the current market structure is not is now fit for purpose. “Energy prices are breaking record after record. The consequences for households and companies are unsustainable,” European Commission President Ursula von der Leyen said Tuesday at the Baltic Sea Summit in Denmark. “We have to face it – together and urgently,” he said as he joined politicians from eight countries bordering the Baltic Sea. That boosts the hopes of long-time skeptics of the EU’s electricity market, which sets prices according to a so-called merit order, with the last inflow needed to balance daily demand setting the price for the entire market. This has recently been very expensive gas. “The proposals we are making to change the price-setting mechanism are falling on increasingly fertile ground,” Polish Prime Minister Mateusz Morawiecki said at the summit. He said he had spoken with the leaders of Denmark, Finland and Estonia, “and all three agree that we really need to bring about a change” that would free the price of energy from dependence on Russian gas. Faced with concerns that Russia will cut off its already reduced gas flows this winter, the EU is rapidly building up its storage — now at 80%, the level planned for November 1. This calmed prices down a bit. One-year German electricity contracts fell to 625 euros per megawatt hour on Tuesday from a high of more than 1,000 euros per MWh on Monday. Dutch TTF natural gas futures, the European benchmark, fell to 250 euros per MWh on Tuesday from a high of 339 euros per MWh on Sunday.
Weighing options
The reforms are under discussion at an emergency summit of EU energy ministers next week. What is not yet clear is how a change in energy markets would work. Any short-term intervention is likely to take the form of some sort of price cap and will come on top of the tangle of national measures already taken by EU countries, said Cillian O’Donoghue, policy director at Eurelectric, a trade association. representing 3,500 European utilities. “Gas prices play a major role in the price of electricity, and gas prices are extremely high — seven times higher than usual,” he said. “So finding an efficient way to disconnect them has some added value.” A similar system is already in place in Spain and Portugal. The two countries got Brussels to agree to a so-called Iberian exemption in June that allowed them to decouple the price of natural gas from electricity for a year, setting a maximum gas price of around 50 euros per MWh. “Iberian prices are definitely down” in the wholesale market, said Cem Bektas, energy market analyst at consultancy ICIS. However, it has seen an increase in electricity exports to France, where electricity prices are higher. This means that Spanish taxpayers – whose money is collected by the government and then redistributed to keep prices down – are effectively subsidizing power for French households. Madrid and Lisbon have allocated 8.4 billion euros for the measure. The system would work better if it covered the entire block, so there wouldn’t be this kind of leakage. Another option would be to impose a windfall tax on energy producers or utilities — something Spain, Italy, Romania and Greece have already done and an idea gaining ground in Germany — although it is causing tensions in the ruling coalition . Von der Leyen also wants to revamp the design of the electricity market in the long term — creating even more unknowns. One option, initially proposed by Greece, would split the market into renewable and fossil fuel producers. It would then set the price for renewable electricity to allow producers to benefit but less than they currently earn from natural gas prices — while keeping the rest of the market intact. Consumers would then pay an average of the two prices. While that would lower energy prices, prices would still be relatively high while natural gas also remains expensive, said Glenn Rickson, head of European energy analysis at S&P Global. It could also discourage investment in renewables by making them less profitable. Another option is a pay-as-you-bid system, where generators bid for electricity contracts that depend on their production costs — which are much lower for renewables than fossil fuels, including natural gas. But producers are likely to simply guess at the price suggested by natural gas suppliers and bid just below that, Rickson said, which again will fail to drive prices down sharply. This shows the need to tackle the “root of evil” – Europe’s dependence on fossil fuels from unreliable partners, said Eurelectric Secretary General Kristian Ruby. “We also need to focus on where the real problem is and try to deal with the fact that right now, reforming the electricity market … will not change the flow of money that is currently going to Russia,” he said. This article is part of POLITICO Pro The one-stop solution for policy professionals who combine the depth of POLITICO journalism with the power of technology Exclusively breaking scoops and ideas Customized policy information platform A high-level public affairs network
title: “Find Out How To Reform The Eu Electricity Market Politico Klmat” ShowToc: true date: “2022-11-09” author: “Carolyn Ryan”
The rise in natural gas prices – one of the blows from the Russian invasion of Ukraine and the subsequent curtailment of supplies to Europe – and the subsequent rise in electricity prices is creating a growing belief among political leaders that the current market structure is not is now fit for purpose. “Energy prices are breaking record after record. The consequences for households and companies are unsustainable,” European Commission President Ursula von der Leyen said Tuesday at the Baltic Sea Summit in Denmark. “We have to face it – together and urgently,” he said as he joined politicians from eight countries bordering the Baltic Sea. That boosts the hopes of long-time skeptics of the EU’s electricity market, which sets prices according to a so-called merit order, with the last inflow needed to balance daily demand setting the price for the entire market. This has recently been very expensive gas. “The proposals we are making to change the price-setting mechanism are falling on increasingly fertile ground,” Polish Prime Minister Mateusz Morawiecki said at the summit. He said he had spoken with the leaders of Denmark, Finland and Estonia, “and all three agree that we really need to bring about a change” that would free the price of energy from dependence on Russian gas. Faced with concerns that Russia will cut off its already reduced gas flows this winter, the EU is rapidly building up its storage — now at 80%, the level planned for November 1. This calmed prices down a bit. One-year German electricity contracts fell to 625 euros per megawatt hour on Tuesday from a high of more than 1,000 euros per MWh on Monday. Dutch TTF natural gas futures, the European benchmark, fell to 250 euros per MWh on Tuesday from a high of 339 euros per MWh on Sunday.
Weighing options
The reforms are under discussion at an emergency summit of EU energy ministers next week. What is not yet clear is how a change in energy markets would work. Any short-term intervention is likely to take the form of some sort of price cap and will come on top of the tangle of national measures already taken by EU countries, said Cillian O’Donoghue, policy director at Eurelectric, a trade association. representing 3,500 European utilities. “Gas prices play a major role in the price of electricity, and gas prices are extremely high — seven times higher than usual,” he said. “So finding an efficient way to disconnect them has some added value.” A similar system is already in place in Spain and Portugal. The two countries got Brussels to agree to a so-called Iberian exemption in June that allowed them to decouple the price of natural gas from electricity for a year, setting a maximum gas price of around 50 euros per MWh. “Iberian prices are definitely down” in the wholesale market, said Cem Bektas, energy market analyst at consultancy ICIS. However, it has seen an increase in electricity exports to France, where electricity prices are higher. This means that Spanish taxpayers – whose money is collected by the government and then redistributed to keep prices down – are effectively subsidizing power for French households. Madrid and Lisbon have allocated 8.4 billion euros for the measure. The system would work better if it covered the entire block, so there wouldn’t be this kind of leakage. Another option would be to impose a windfall tax on energy producers or utilities — something Spain, Italy, Romania and Greece have already done and an idea gaining ground in Germany — although it is causing tensions in the ruling coalition . Von der Leyen also wants to revamp the design of the electricity market in the long term — creating even more unknowns. One option, initially proposed by Greece, would split the market into renewable and fossil fuel producers. It would then set the price for renewable electricity to allow producers to benefit but less than they currently earn from natural gas prices — while keeping the rest of the market intact. Consumers would then pay an average of the two prices. While that would lower energy prices, prices would still be relatively high while natural gas also remains expensive, said Glenn Rickson, head of European energy analysis at S&P Global. It could also discourage investment in renewables by making them less profitable. Another option is a pay-as-you-bid system, where generators bid for electricity contracts that depend on their production costs — which are much lower for renewables than fossil fuels, including natural gas. But producers are likely to simply guess at the price suggested by natural gas suppliers and bid just below that, Rickson said, which again will fail to drive prices down sharply. This shows the need to tackle the “root of evil” – Europe’s dependence on fossil fuels from unreliable partners, said Eurelectric Secretary General Kristian Ruby. “We also need to focus on where the real problem is and try to deal with the fact that right now, reforming the electricity market … will not change the flow of money that is currently going to Russia,” he said. This article is part of POLITICO Pro The one-stop solution for policy professionals who combine the depth of POLITICO journalism with the power of technology Exclusively breaking scoops and ideas Customized policy information platform A high-level public affairs network
title: “Find Out How To Reform The Eu Electricity Market Politico Klmat” ShowToc: true date: “2022-11-14” author: “Gregory Johnson”
The rise in natural gas prices – one of the blows from the Russian invasion of Ukraine and the subsequent curtailment of supplies to Europe – and the subsequent rise in electricity prices is creating a growing belief among political leaders that the current market structure is not is now fit for purpose. “Energy prices are breaking record after record. The consequences for households and companies are unsustainable,” European Commission President Ursula von der Leyen said Tuesday at the Baltic Sea Summit in Denmark. “We have to face it – together and urgently,” he said as he joined politicians from eight countries bordering the Baltic Sea. That boosts the hopes of long-time skeptics of the EU’s electricity market, which sets prices according to a so-called merit order, with the last inflow needed to balance daily demand setting the price for the entire market. This has recently been very expensive gas. “The proposals we are making to change the price-setting mechanism are falling on increasingly fertile ground,” Polish Prime Minister Mateusz Morawiecki said at the summit. He said he had spoken with the leaders of Denmark, Finland and Estonia, “and all three agree that we really need to bring about a change” that would free the price of energy from dependence on Russian gas. Faced with concerns that Russia will cut off its already reduced gas flows this winter, the EU is rapidly building up its storage — now at 80%, the level planned for November 1. This calmed prices down a bit. One-year German electricity contracts fell to 625 euros per megawatt hour on Tuesday from a high of more than 1,000 euros per MWh on Monday. Dutch TTF natural gas futures, the European benchmark, fell to 250 euros per MWh on Tuesday from a high of 339 euros per MWh on Sunday.
Weighing options
The reforms are under discussion at an emergency summit of EU energy ministers next week. What is not yet clear is how a change in energy markets would work. Any short-term intervention is likely to take the form of some sort of price cap and will come on top of the tangle of national measures already taken by EU countries, said Cillian O’Donoghue, policy director at Eurelectric, a trade association. representing 3,500 European utilities. “Gas prices play a major role in the price of electricity, and gas prices are extremely high — seven times higher than usual,” he said. “So finding an efficient way to disconnect them has some added value.” A similar system is already in place in Spain and Portugal. The two countries got Brussels to agree to a so-called Iberian exemption in June that allowed them to decouple the price of natural gas from electricity for a year, setting a maximum gas price of around 50 euros per MWh. “Iberian prices are definitely down” in the wholesale market, said Cem Bektas, energy market analyst at consultancy ICIS. However, it has seen an increase in electricity exports to France, where electricity prices are higher. This means that Spanish taxpayers – whose money is collected by the government and then redistributed to keep prices down – are effectively subsidizing power for French households. Madrid and Lisbon have allocated 8.4 billion euros for the measure. The system would work better if it covered the entire block, so there wouldn’t be this kind of leakage. Another option would be to impose a windfall tax on energy producers or utilities — something Spain, Italy, Romania and Greece have already done and an idea gaining ground in Germany — although it is causing tensions in the ruling coalition . Von der Leyen also wants to revamp the design of the electricity market in the long term — creating even more unknowns. One option, initially proposed by Greece, would split the market into renewable and fossil fuel producers. It would then set the price for renewable electricity to allow producers to benefit but less than they currently earn from natural gas prices — while keeping the rest of the market intact. Consumers would then pay an average of the two prices. While that would lower energy prices, prices would still be relatively high while natural gas also remains expensive, said Glenn Rickson, head of European energy analysis at S&P Global. It could also discourage investment in renewables by making them less profitable. Another option is a pay-as-you-bid system, where generators bid for electricity contracts that depend on their production costs — which are much lower for renewables than fossil fuels, including natural gas. But producers are likely to simply guess at the price suggested by natural gas suppliers and bid just below that, Rickson said, which again will fail to drive prices down sharply. This shows the need to tackle the “root of evil” – Europe’s dependence on fossil fuels from unreliable partners, said Eurelectric Secretary General Kristian Ruby. “We also need to focus on where the real problem is and try to deal with the fact that right now, reforming the electricity market … will not change the flow of money that is currently going to Russia,” he said. This article is part of POLITICO Pro The one-stop solution for policy professionals who combine the depth of POLITICO journalism with the power of technology Exclusively breaking scoops and ideas Customized policy information platform A high-level public affairs network
