By Kate Abnett
BRUSSELS -Europe's electricity market does not need a radical redesign, but policymakers should consider more measures to support the shift to low-carbon energy and protect consumers from high costs, EU energy market regulators said on Friday.
European energy prices hit record highs this year after the invasion of Ukraine by Russia, Europe's top gas supplier. That followed months of already high gas prices, caused by surging demand in economies recovering from the COVID-19 pandemic and growing concerns about Russian supply.
In response, the European Commission last year asked the EU agency for the cooperation of energy regulators (ACER) to assess how Europe's electricity market is functioning.
"ACER finds that the current wholesale electricity market design ensures efficient and secure electricity supply under relatively 'normal' market conditions. As such, ACER's assessment is that the current market design is worth keeping," ACER said in a report on Friday.
"Whilst the current circumstances impacting the EU’s energy system are far from 'normal', ACER finds that the current electricity market design is not to blame for the current crisis," it said.
Rather than stoke Europe's energy crisis, ACER said the current market rules had helped ease its impact - for example, by enabling Belgium and France to import more electricity to avoid shortages during nuclear power plant outages.
Most EU countries are already using tax cuts and subsidies to shield consumers from the recent jump in energy prices, but states disagree on whether Europe's electricity market itself needs redesigning.
Spain and Portugal this week secured EU approval to cap the cost of gas used for power in their domestic markets, and both along with other countries had initially pushed for an EU-wide price cap.
Other countries, among them Germany and the Netherlands, say a gas price cap would effectively subsidise fossil fuel generation with public funds, which should be spent on the shift to clean energy.
ACER said longer-term improvements would still be needed to ensure the system supports the massive expansion of renewable energy needed for the EU to reach net zero emissions by 2050.
These include increased electricity trade between EU countries, more state support for renewable energy power purchase agreements, and better coordination between countries to support investments in new electricity infrastructure.
German utility industry group BDEW said it supported ACER's views, reiterating a call for politicians to clear hurdles and help the sector develop new business models.
BDEW cited an ACER estimate that the advantages of EU cross-border trade in power were already saving consumers 34 billion euros ($35.90 billion) a year.
ACER said any interventions should focus on the root cause of electricity price spikes - currently, high gas costs - but that the bigger the intervention, the more risk of distorting the market.
One option could be temporary price limits that kick in if prices surge over a short period, it said, although it warned that could undermine the incentive to limit demand in such situations.
($1 = 0.9471 euros)
