Table of contents
- How does the electricity market in the EU work?
- Why is the electricity market in the EU being reformed?
- What applies to consumers?
- How should renewable energies be expanded?
- What are the reactions?
- What happens now?
Questions and answers - How the EU wants to better protect consumers from fluctuating electricity prices
Consumers in the EU are to be better protected from escalating electricity prices in future. Negotiators from the EU countries and the European Parliament agreed on a reform of the European electricity market in Strasbourg early on Thursday morning.
In addition to more stable prices, the changes are intended to promote the expansion of renewable energies. Here are some questions and answers:
How does the electricity market in the EU work?
The electricity market in the EU works according to the merit order principle - and will continue to do so. This refers to the order in which the power plants offering electricity on the electricity exchange are deployed. Power plants that can produce electricity cheaply are used first to cover demand. These are wind power plants, for example. In the end, however, the price is based on the last power plant to be switched on, i.e. the most expensive - often gas-fired power plants.
Why is the electricity market in the EU being reformed?
Calls for a reform of the European electricity market have become loud due to extremely high electricity prices in the past year. One of the reasons for the high prices was soaring gas prices due to the Russian war of aggression against Ukraine. It was also noticeable that at times around half of France's nuclear power plants were out of action due to defects or maintenance. The reform aims to make the electricity market "more stable, affordable and sustainable", according to the European Parliament.
What applies to consumers?
The basis for the agreement that has now been reached was a legislative proposal from the EU Commission in the spring. This envisages giving private individuals the right to fixed-price contracts as well as contracts with dynamic prices. According to the agreement, the federal states should take more measures to protect vulnerable customers, as they announced. According to Green MEP Michael Bloss on the platform X (formerly Twitter), there should also be more consumer protection through transparent electricity bills. According to him, power cuts - i.e. cutting off customers' electricity - should be banned.
In the event of an electricity price crisis, which can be declared by the EU countries under certain conditions, electricity prices for vulnerable and disadvantaged customers should be able to be reduced further, according to the countries' communication.
How are renewable energies to be expanded?
At the heart of the reform are new long-term contracts between governments and electricity producers, so-called Contracts for Difference (CfDs). With these contracts for difference, states guarantee electricity producers a minimum price for electricity if they make new investments. This applies to investments in renewable energies such as wind and solar power and in nuclear power.
If the market price falls below an agreed price, the state steps in and makes up the difference. If the price is higher, the surplus goes to the state. This is intended to create incentives for the domestic production of clean electricity.
What are the reactions?
The Green Group in the European Parliament cannot support the agreement reached, said German MEP Bloss on Thursday. There are positive elements in the agreement, such as progress on the social side. But too many coal subsidies were possible.
"One day after the historic agreement at the climate conference in Dubai, the EU is deciding on new fossil fuel subsidies for the dirtiest coal-fired power plants. This makes the EU completely untrustworthy." With this agreement, the EU can immediately relinquish its accolade as a climate pioneer.
What happens now?
The agreement still has to be formally confirmed by the EU Parliament and the countries before the reform can come into force.
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- The reform of the European electricity market, agreed upon by EU negotiators and the European Parliament in Strasbourg, aims to protect consumers in the EU from escalating electricity prices, especially those operating in gas-fired power plants.
- Under the merit order principle, which governs the EU electricity market, power plants with lower electricity production costs, such as wind power plants, are prioritized over more expensive options like gas-fired power plants, contributing to the fluctuation of electricity prices in Europe.
- The European Parliament, in an effort to stabilize the electricity market and provide more affordable and sustainable electricity to consumers, has stressed the importance of expanding renewable energy sources using Contracts for Difference (CfDs).
- As part of the EU electricity market reform, vulnerable and disadvantaged consumers will have the opportunity to benefit from reduced electricity prices during an electricity price crisis, in order to mitigate the impact of rising energy costs on their households.
Source: www.stern.de
