Filenews 30 August 2022
By Haris Floudopoulos
For the first time, the European Commission is ready to propose, even temporarily, solutions to deal with the energy crisis, which will diversify the current operating model of the electricity market.
What does this mean in practice? As Commission President Ursula von der Leyen said yesterday, "rising electricity prices are now exposing, for different reasons, the limitations of the current design of the electricity market", adding that the Commission is now working on an urgent intervention and a structural reform of the electricity market.
According to what has become known, the Commission is working on the technical formula for capping wholesale gas prices, with the aim of de-escalating electricity prices on European markets.
The plan is expected to be finalized and made public by the last ten days of September at the latest, in order to be approved by the minister's council and the Summit, without excluding this from happening earlier.
The exact details of the EU intervention plan are still under development and EU diplomats said the Commission could present a detailed plan only this week.
What will this provide for?
Information indicates that as far as the cap is concerned, two alternatives are being considered: the first concerns the brake on natural gas imports when they exceed the cap that will be set on fuel prices. The expectation is that through the critical mass that Europe has, it will succeed in having a decisive influence on price formation by applying the cap.
The second alternative concerns the application of the Iberian model on a pan-European scale, by subsidizing natural gas imports. Under this model, importers will be compensated for the difference between the cap and the price at which they procured the gas, with the aim that the price of the fuel does not exceed the ceiling to be introduced.
Decoupling the electricity market
In parallel with the cap, other alternatives are being studied with the aim of decoupling electricity prices from gas prices. These solutions include the Greek proposal for a radical reform of the Target Model (electricity market operating model).
The Greek proposal, as is well known, provides for the division of the pre-day market into two parts, where in the first will participate RES, hydroelectric and nuclear and in the second will participate the natural gas and coal units. However, the changes to the Target Model will require, unlike the cap on natural gas which can be applied immediately, a long time.
Price explosion
It is worth noting that the need to intervene in the electricity market is also highlighted by the explosive increase in prices in recent days.
Indicatively for today in 10 countries the price of electricity exceeds €700 / MWh. August average for over 20 countries exceeds €400 / MWh while in some countries it even exceeds €500 / MWh and is more than double the average of the year so far.
As far as the Greek market is concerned, the price is currently set at €671.14 euros / MWh, with the August average being at €427.17 / MWh compared to €274.1 / MWh which is the average of the year. Finally, yesterday, despite the slight decline, gas prices remained extremely high at €272 / MWh.
Source: Capital.gr
