Consultation on the Revision of the EU’s Electricity Market Design – EUTurbines’ Contribution

17 February 2023

On the 23 of January 2023 the European Commission launched a public consultation seeking feedback on “making electricity bills more independent from the short-term cost of fossil fuels”, “driving renewable investments”, “alternatives to gas to keep the electricity system in balance”, “lessons learned from short term market interventions”, “better consumer empowerment and protection” and “stronger protection against market manipulation”.

As the association representing the European gas and steam turbine manufacturers, and fully supporting the decarbonisation of the European energy system and an integrated European energy market that ensures affordable, secure, and carbon-free energy, we have responded to such a Consultation.

We stand for a market that supports flexible solutions that help balance energy supply and demand in the short, medium, and long term.

While we fully understand and support the need to protect consumers from excessive price peaks, drive renewable investments and deter market manipulation, we regret that the role of gas-fired generation in the medium and long-term is not adequately considered.

The current energy crisis was created by the low availability of different energy sources and technologies, combining in a perfect storm. As the electricity system decarbonises, gas power plants running on renewable fuels will continue to be an important part of the solution to the energy “trilemma” of ensuring reliable, affordable, and decarbonised energy. Any review that would oversee this fact risks endangering the secure functioning of the European electricity market and will lead to sub-optimal economic outcomes both for consumers and for businesses.

Our key messages:

  • PPAs are an efficient way to mitigate the impact of short- term markets on the price of electricity paid by the consumer, but they should not become a mandatory instrument.
  • Forward hedging is as an efficient way to mitigate exposure to short- term volatility for consumers, but longer-term contracts are needed to drive investment.
  • Two-way contracts for difference, or similar arrangements, could be an efficient way to mitigate the impact of short-term markets on the price of electricity, but they should not become a mandatory instrument.
  • The exposure by consumers to short-term volatility is determined by the type of contract and tariff they subscribe to. The exact type of long-term contract or hedging product used by suppliers to mitigate volatility and provide price certainty to customers should not make a large difference there.
  • The revenue limitation of inframarginal generators currently in place should not be maintained beyond the planned expiry date.
  • All flexible capacity needs to be incentivised to drive competition across different timeframes.
  • Effective market-based carbon pricing should be the key tool for incentivizing the deployment of low-carbon technologies and fuels in the energy sector.
  • Remunerating operators of assets for keeping flexible capacities (and the linked capabilities) available through capacity remuneration mechanisms (CRMs) should be the way forward.
  • We understand that “crisis” is meant to refer to periods of low supply and very high prices. In such cases, the price signal should suffice to reduce demand.

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