This meeting was hybrid and under Chatham House Rule.

The ERCST workstream on “EU Climate Policy and Electricity Market” provides analytical input on the interactions between EU climate policy and electricity market. Within the scope of the first part of this project (1^st quarter of 2023), the ERCST team has developed a framework matrix (Annex 1) for analysing the elements of the EC proposal on electricity market reform through a climate change lens.

Following on this preliminary work, ERCST focused on discrete interaction’s cells of this matrix framework. During this event, the attention was given to the short-term pricing elements (including marginal pricing and market interventions) and their interactions with relevant climate policies (ETS, RED…) to understand whether/to which extent these provide short-term operational signals for decarbonization.

To reduce its dependence on Russian fossil fuels, the EC has introduced REPowerEU in May 2022. Gaz supplies reduction by Russia is the main cause of the recent skyrocketing gas prices in the EU, which have impacted the price of electricity produced in gas-fired power plants and affected electricity prices overall: the EU wholesale electricity market is based on a marginal pricing system, and gas-fired plants are often the marginal unit.

This situation has led to unreasonable windfall profits for some electricity generators and consumers paying far more for their electricity than is justified by the cost of production. As the price of energy was expected to remain in the EU, emergency market interventions were then introduced by the Council Regulation (EU) 2022/1854 in October 2022.

To address the social and economic impacts of the energy crisis, the EC published in March its proposal for reforming the EU electricity market design to boost renewables, better protect consumers and enhance industrial competitiveness. It aims at enhancing the viability of long-term contacts, while preserving the current framework of the EU wholesale electricity market based on marginal pricing.

This meeting started by a presentation by ERCST which provided the discussion background. This was followed by preliminary remarks from the European Parliament. Then followed a panel discussion during which speakers shared their views and provide their opinions on the proposal. Interventions and debate from the audience will take place during the following Q&A session.

Event materials:

Agenda    ERCST Slides