Buying time for proper electricity market reform

(EurActiv, 21 Dec 2022) A structural reform of the electricity market is necessary in light of the increasing demand for electricity and the growing share of renewable energies. To secure investments in the short term, the EU should establish a European fund that guarantees a feed-in premium for all newly connected wind and solar plants, write Conall Heussaff and Georg Zachmann.

Georg Zachmann is senior fellow at Bruegel, a Brussels-based economic think tank. Conall Heussaff is research assistant at Bruegel.

Electricity markets are undergoing a period of unprecedented turmoil. The lack of French nuclear capacity and historically high gas and coal prices have put the European power system under enormous stress.

While the internal market succeeded to manage the physical scarcity of electricity and gas, it has come under political attack for the explosion of power prices across the continent.

This has led national policy-makers such as the Spanish Prime Minister Sanchez, the French President Macron or European Commission President von der Leyen to push for a new electricity market design to lower power prices in the near term.

At the same time, structural reform is needed to address the challenges arising with increasing electricity demand and growing shares of renewables during the decades of the transition to net zero.

Electricity market redesign was hence on the policy agenda independently from the current crisis. For example, the German “power market of the future” project (“Strommarkt der Zukunft”) kicked off in 2021.

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EurActiv, 21 Dec 2022: Buying time for proper electricity market reform