Italy and France: EU electricity market to be reformed
“We are in favor of a timely ed ambitious reform of the design of the European electricity market in 2023″. The passage of the joint statement Italo-French rekindles the debate on the need for a profound reform in the price formation mechanism on the European market. A need that emerged with the run-up in gas prices following the Russian invasion of Ukraine. Which, precisely because of the way the European electricity market is regulated, has dragged up the bills of households and businesses.
The declaration of Urso and Le Maire
For ministers Adolfo Urso e Bruno the Mayor“the wholesale electricity market, in which the price is defined by the most expensive source of production, is enabling aoptimal allocation of resources”. However, underline the Italian and French ministers, this model “hinders investment in decarbonising our economies, which are necessary to achieve climate goals.
The contribution of renewables
According to experts contacted by Truth & Business“this reform aims to increase the contribution of renewables in the formation of the price of electricity. But the paradigm does not change it in a profound way”. At the moment, it is reconstruction, the European production system cannot do without gas. The reform “can contribute to create opportunitiesat a structural level, however, the transition will also be to incentivize i supply contracts long-term supply of liquefied gas, given that Europe will maintain a significant deficit in this sector”.
Bring prices closer to the cost of production
Among the distortions of the current structure, there is also the fact that the producers of renewables – whose production costs are fixed – realize extra profits in peak price phases, as happened during 2022 due to the increase in the price of gas.
The reform envisaged by the Italian and French ministers “should integrate in structural way short-term markets with long-term instruments, such as contracts governing the administration of electric energy, contracts for difference (CfD) and Capacity Markets for storage and thermal capacity”. One of the objectives of this reform “is to bring the prices paid by the various categories of consumers closer to the production cost of the electricity mix, in order to promote decarbonisation and electrification”.