Von der Leyen announces an “emergency intervention” in the electricity market due to skyrocketing prices
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The President of the European Commission, Ursula von der Leyenannounced this Monday that it is preparing a “emergency intervention” in the community electricity market -which will be followed by an in-depth reform of its design- in order to put a stop to the “exorbitant prices“of the last days.
An escalation in the electricity bill that Brussels attributes to the “energy blackmail“that the Russian president is exercising, Vladimir Putin, so that the EU stops supporting Ukraine. The last episode is the complete closure of the Nord Stream 1 gas pipeline during the next few days for alleged maintenance reasons that were not scheduled.
Von der Leyen has not specified in what terms will put on the table the legislative proposals for emergency intervention or for the long-term reform of the electricity market. His team has also avoided clarifying the calendar.
[Sánchez reclama a la UE que financie la interconexión de gas entre España y Francia]
The president has also not given details about its content, although in the past she herself has defended delinking the price of electricity from that of gas to avoid a contagion effectin line with what Spain or France claim.
In parallel, the Czech Republic, which holds the rotating presidency of the European Union, has called a extraordinary meeting of energy ministers on September 9. “We must fix the energy market. The EU-level solution is by far the best we have,” said Czech Industry Minister Jozef Síkela.
After a weekend full of negotiations, I can announce that I am convening an extraordinary meeting of the Energy Council. We will meet in Brussels on the 9th September.
We must fix the energy market. Solution on the EU level is by far the best we have. pic.twitter.com/tsOzOSHpx0
— Jozef Sikela (@JozefSikela) August 29, 2022
“Ending our dependence on fossil fuels from Russia is only the first step. Exorbitant electricity prices are now exposing, for different reasons, the limitations of the current design of our electricity market”explained Von der Leyen in a speech in Slovenia.
“It was developed under completely different circumstances and for completely different objectives. It no longer meets its objectives. And that is why the Commission is now working on an emergency intervention and structural reform of the electricity market. We need a new market model for electricity that really works and brings us back into balance,” says the president.
This Monday’s announcement represents a change in the position of the Community Executive, which until now he defended the benefits of the current marginalist model pricing, which means that it is gas that determines the price of electricity. Any reform would reduce the incentives for renewables and put the security of supply at risk, repeatedly argued the Commissioner for Energy, Kadri Simson.
Von der Leyen herself first supported decoupling the price of gas from that of electricity in October last year, but was later disavowed by her own team. Also, Germany, Holland and the Nordics formed a common front in defense of the current model pricing in the face of pressure from Spain and France.
[Bruselas rechaza la reforma del mercado eléctrico que pide España por el riesgo de apagones]
The confrontation ended with a minimum agreement in March on the “Iberian exception”which in practice means decoupling electricity and gas but only applies to Spain and Portugal.
In June, the president returned to the charge in her proposal to reform the electricity market. “What is the problem with the structure of the market? We still have an electricity market that is designed in a way that was necessary 20 years ago when we started to introduce renewable energies“Von der Leyen then said in a speech at the European Parliament.
“Today, the market is completely different. Renewable energies are the most profitable and the cheapest. Gas is the most expensive, but defines the entire price. And this market system no longer works. We have to reform it. We have to adapt it to the new realities of the domain of renewables (…). This is a great reform that will take time,” said the president.
However, the stratospheric levels that prices are reaching in recent days have led many Member States to change their position. The last, Germany. The Vice Chancellor, Robert Habeckof the Greens, has joined the theses of Spain and France and also defends decoupling the prices of gas and electricity, According to the newspaper Handelsblatt.
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