Europes electricity market not in need of redesign, regulators say

div classBodysc17zpet90 cdBBJodivpBy Kate Abnett

BRUSSELS Reuters – Europes electricity market does not need a radical redesign, but policymakers should consider more measures to support the shift to lowcarbon energy and protect consumers from high costs, EU energy market regulators said on Friday.pdivdivdiv classBodysc17zpet90 cdBBJodiv

European energy prices hit record highs this year after the invasion of Ukraine by Russia, Europes top gas supplier. That followed months of alreadyhigh gas prices, caused by surging demand in economies recovering from the COVID19 pandemic and growing concerns about Russian supply.

In response, the European Commission last year asked the EU agency for the cooperation of energy regulators ACER to assess how Europes electricity market is functioning.p

“ACER finds that the current wholesale electricity market design ensures efficient and secure electricity supply under relatively ‘normal’ market conditions. As such, ACERs assessment is that the current market design is worth keeping,” ACER said in a report on Friday.

Rather than stoke Europes energy crisis, ACER said the current market rules had helped ease its impact – for example, by enabling Belgium and France to import more electricity to avoid shortages during nuclear power plant outages.

ACER said longerterm improvements would still be needed to ensure the system supports the massive expansion of renewable energy needed for the EU to reach net zero emissions by 2050.

These include increased electricity trade between EU countries, more state support for renewable energy power purchase agreements, and better coordination between countries to support investments in new electricity infrastructure.

Most EU countries are already using tax cuts and subsidies to shield consumers from soaring costs, but states disagree on whether Europes electricity market itself needs redesigning. Spain and Portugal this week secured EU approval to cap the cost of gas used for power in their domestic markets.

ACER said any interventions should focus on the root cause of electricity price spikes – currently, high gas costs – but that the bigger the intervention, the more risk of distorting the market.

One option could be temporary price limits that kick in if prices surge over a short period, it said, although it warned that could undermine the incentive to limit demand in such situations.

pp Reporting by Kate Abnett editing by Richard Pullin

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