EU energy majors call for careful assessment of power market reform

Europe’s largest electricity and gas utilities have come together to make proposals in relation to the upcoming reform of the EU Electricity Market Design, which, they say, should come “with a strong focus on enabling framework conditions for renewable and low-carbon electricity investments and energy efficiency.”

An open letter, published by Sweden’s Vattenfall AB and signed by many of its European peers, notes that the competitiveness of the industry in the EU is challenged by the Inflation Reduction Act (IRA) that was adopted by the US government last year.

The European energy majors believe that the planned reform of the electricity market design is a great opportunity to foster investments in renewables and low-carbon power, but warned that it should be handled with caution so that fragmentation of the internal energy market is avoided.

For this reason, the sector players pointed at certain elements that should be considered, such as the need to properly assess a reform with a future-proof design rather than “urging structural corrective measures that would not deliver the expected outcomes.” They note that long-term contracts are a good way to shield energy consumers from high prices and extreme volatility.

As per renewables and low-carbon power, the energy majors believe that “long-term commitments should be incentivised (PPAs, CfDs, CRMs) to de-risk the investments and hedge final customers against price volatility.” They added that regulatory stability and long-term price signals are a must.

Another focus point outlined by them is the need for an improvement of short-term markets. Some initiatives given as examples of ways to increase market integration include flow-based day-ahead market coupling, maximising cross-border trade, and demand response participation in markets. The establishment of grids to enable the green transition is also a must, according to them.

Lastly, they warned that the exceptional emergency measures adopted a few months back by the European Council should not be confused with structural market reform.

In addition to Vattenfall, the letter has been signed by the CEZ Group, EDP, EnBW, Enel, Engie, E.on, Fortum, Iberdrola, Ørsted, RWE, Statkraft, Uniper and Verbund.

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