Research Commentary: Calls for an Electricity Market Reform in the EU: Don’t Shoot the Messenger
Tim Schittekatte and Carlos Batlle
February 2023
The ongoing energy crisis has severely hit energy consumers in Europe. Although it is a gas crisis, the existing electricity market design has been made a scapegoat. In a speech about the rising electricity prices, Ursula von der Leyen, the president of the European Commission, even went as far as saying that “what is the problem is the structure of the [power] market” and “this [power] market system does not work anymore, we have to reform it”. Consequently, on the 23rd of January 2023, the European Commission launched a public consultation on the reform of the EU’s electricity market design. In this Research Commentary, we provide our perspective. We argue that the issue that has led to the current financial hardship is an incomplete long-term power market. We discuss proposals that aim at completing the long-term market while fulfilling the two main objectives of the reform: facilitating the entry of new renewables at the lowest system cost and limiting the impact of sustained high prices on end users’ bills. We argue that these two different objectives are less related than often thought, concern different groups of stakeholders, i.e., newly connecting generating units and existing generators, and require different regulatory solutions.
