Europe, Volatility in electricity prices will increase in the coming years – ACER, SEE Energy News
The current energy crisis is essentially caused by a high jump in the price of natural gas, which affects electricity prices, and if countries intend to intervene in the electricity market, they should solve this main cause instead of changing the rules in that market, the European Energy Cooperation Agency said. regulator (ACER).
ACER has published a final report on high energy prices and the wholesale electricity market in the European Union, stating that the current market design is not responsible for the energy crisis and predicting an increase in electricity price volatility in the coming years.
ACER also proposed 13 measures that would improve the functioning of the wholesale market in the future.
The report was requested by the European Commission as part of a package of measures to mitigate the consequences of the drastic increase in the price of electricity and gas. ACER released its preliminary report in November.
ACER believes that the current model of the wholesale electricity market ensures an efficient and secure supply of electricity in relatively normal market conditions and should not be changed. Some long-term improvements will need to be introduced in order for the existing market framework to allow for an ambitious decarbonisation path in the EU over the next 10-15 years.
Poorly designed emergency measures or wrong price signals due to disrupting market mechanisms for price formation can delay the integration of the market into the EU and competition, which would jeopardize the benefits achieved so far and probably increase the costs of future energy transition, ACER said.
In the last decade, those benefits for consumers are estimated at 34 billion euros.
Measures to reduce gas prices
As for measures to mitigate the impact of high prices taken by member states, ACER believes that the greater the intervention, the greater the chances of market disruption, especially in the medium and long term.
The need for intervention in the electricity market in the current circumstances should be carefully considered, and if policy makers decide to do so, they should address the root cause of the problem (current gas prices) rather than measures in that market, the report said.
Measures to address the root cause include accelerated reductions in gas demand (increased energy efficiency, replacement of other fuels) and / or additional efforts to influence price reductions (new gas suppliers or deliveries at lower prices), while maintaining prices that still provide the necessary deliveries of liquefied natural gas (LNG). These efforts, ACER claims, would likely require an intensive dialogue between EU governments and key gas suppliers.
The agency also mentioned several structural measures, which are considered as options in academic circles, in order to protect customers from future situations in which prices will be high for a long time.
Energy interdependence among EU member states will grow
The report emphasizes that the integration of the electricity market of the EU member states will be crucial for the implementation of decarbonisation of the energy sector at lower costs. Integration will ensure security of supply so that members can rely on each other in emergencies.
An increasingly important goal is increased energy independence in relation to certain third countries, but its realization will at the same time require an increase in energy interdependence among EU member states, ACER said.
In the new circumstances, the market framework will need to allow mass acceptance of low-CO2 production, especially renewables, characterized by high initial investment costs, while ensuring that flexible resources complement volatile renewables, where and when needed.
The volatility of electricity prices is likely to increase in the years ahead, indicating growing system flexibility needs, the report said.
ACER identified several areas where more work should be done to strengthen the existing electricity market model:
- improve the functioning of short-term electricity markets,
implement energy transition through efficient long-term markets,
increase the flexibility of the power system,
protect consumers from excessive volatility while reaching inevitable compromises,
combating non-market barriers and political barriers and
preparation for future high energy prices in peacetime.