EU consumers need better protection against rising electricity prices. The European Parliament and traders from EU countries have agreed on a reform of the electricity market. New long-term contracts between governments and electricity producers are planned (see video above).
So-called Contracts for Difference (CfDs) guarantee electricity producers a minimum price when they make new investments. The condition for this is that the money flows into sustainable energy or nuclear energy. If the market price falls below an agreed value, the state steps in and makes up the difference. If the price is higher, the surplus goes to the state. In this way there should be an incentive to create domestic, clean electricity.
The basis for the new regulation was a bill from the European Commission, which ensures that private individuals are entitled to contracts with a fixed price and to contracts with dynamic prices.
The merit order principle remains
In principle, despite the reform, the electricity market will continue to function according to the so-called merit order principle. This is about the order of the power plants on the stock exchange. The first to be deployed are power stations that can produce electricity cheaply. These are, for example, wind turbines. However, the price depends on the last switched, and therefore most expensive, exchange. These are often gas-fired power stations.
In addition to more stable prices, the expansion of renewable energy sources should also be promoted. Last year there were many calls for a reform of the European electricity market due to extremely high prices. The reason for this was sometimes exploding gas prices as a result of the war in Ukraine and the temporary failure of French nuclear power plants. The EU Parliament and the states have yet to formally confirm the reform.
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
