Von der Leyen announces reform of the EU electricity market

Bled (dpa) – EU Commission President Ursula von der Leyen has announced a reform of the electricity market in the EU in view of the high energy prices. “The skyrocketing electricity prices show the limits of our current electricity market design for various reasons,” said von der Leyen at an international conference in Slovenia on Monday.

The system was developed for different circumstances and is no longer appropriate. “That’s why we are now working on an emergency measure and on a structural reform of the electricity market,” said von der Leyen.

On the European electricity market, the prices are currently set primarily by gas-fired power plants. Since the price of gas has increased sharply against the background of the war in Ukraine, electricity has also become more expensive. A reform of the European electricity market could revise this mechanism so that consumers pay less for cheap electricity from the sun and wind, for example. Federal Minister of Economics Robert Habeck (Greens) recently announced a fundamental reform to decouple the development of end customer prices for electricity from rising gas prices. The issue is also to be discussed at a special meeting of EU energy ministers on 9 September.

The so-called merit order system in the EU determines the price development based on the order in which the power plants are deployed. Power plants that can produce electricity cheaply are used first to meet demand. These are wind turbines, for example. In the end, however, the price depends on the power plant that was switched on last and is therefore the most expensive, in order to cover the demand – these are currently the gas-fired power plants. Since the prices are particularly high, providers of renewable energies achieve very high profits as a result. The system was originally intended to create an incentive for investing in renewable energy.

© dpa-infocom, dpa:220829-99-555149/3

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