After many months of resisting, the reality of the exorbitant electricity prices in the European Union have ended up forcing the European Commission to announce “a comprehensive and profound reform of the electricity market” and “decoupling the dominant influence of gas on the price of electricity”. The reform announced this Wednesday by the president of the European Commission, Ursula von der Leyen, during the annual State of the Union debate before the European Parliament, responds one year late to the demand of the governments of Spain, France, Italy and other countries in October 2021, when the rise in the price of gas throughout the summer of that year made clear the dysfunction of the electricity wholesale price system in the EU. The system that is now going to be reformed establishes that the last unit to produce electricity that intervenes to cover the demand and the most expensive (gas) sets the global price, even though its contribution is marginal and the majority has been produced at much lower costs. .
The rectification of the European Commission is welcome, even if it arrives late. It is a pity that the astronomical prices of electricity during the last 12 months have skyrocketed business costs and inflation and have impoverished families. Now it is urgent to adopt and apply this reform of the electricity market as soon as possible so that excessive electricity costs do not continue to hamper the EU economy and the international competitiveness of European companies: the price of gas in the European reference market Dutch TTF It has been seven times higher than that of the North American market for months.
The proposal of Von der Leyen, a prominent leader of the European People’s Party, of create a tax on energy companies’ “never dreamed of” windfall profits Thanks to the exorbitant prices, it represents European support for the President of the Spanish Government, Pedro Sánchez. The European Commission highlights that the 140,000 million euros that will be collected with this tax will serve to pay measures to cushion the energy bill for families and businesses. But the public guarantees proposed to overcome the liquidity problems of the firms that operate in the energy markets must not become a disguised rescue of the financial actors that have been speculating on prices for months.
An important detail of Von der Leyen’s energy proposals is to establish another reference index for the price of gas in Europe, after the TTF market, where it exceeded 339 euros per megawatt hour in August, has shown that “it is not adapted” to reality. The announcement comes after the large Spanish electricity companies, Endesa, Iberdrola and Naturgy, demanded its reform, because had turned into pure financial speculation, where the volume of gas in the negotiated contracts is one hundred times greater than the physical gas supplied. The downside of the proposals put forward is that they could raise measures that discouraged the use of fossil fuels. To try to avoid this, the European Commission’s commitment to the development of green hydrogen can help facilitate the EU’s energy transition. Hydrogen could allow large industrial energy consumers (steel, cement, chemicals) to produce without CO emissionstwo and offer an opportunity to countries, such as Spain, that have made the development of this energy source a strategic commitment.