Francesco Gazzoletti, Christian Egenhofer and Edoardo Righetti
EU climate policy has had a profound impact on the EU‘s electricity mix. Unprecedented levels of renewable energy have altered the parameters of the electricity market, giving rise to a debate around the merit of the market’s current design. The energy price crisis following the Russian invasion of Ukraine has created, in the second half of 2022, political momentum for reform. European electricity consumers are now demanding to reap the benefits of the low generation cost of renewables.
With the end of the European Parliament’s current mandate in 2024, and with no signs of consensus over the direction to take, a full reform today is a risk the EU should not be willing to take.
What is possible, however, is a strengthening of the long-term markets as a way to complement short-term ones, and ultimately shield consumers against price volatility. Even this focused reform, however, if not properly designed with a core set of common design principles, could severely compromise the functioning of the Internal Energy Market.
This CEPS Explainer highlights the current issues at stake, discusses different options and points to possible ways forward.