The European Commission (EC) has issued a report (click here) analysing the impacts of the emergency energy measures implemented in response to the ongoing Ukraine conflict. There are several important findings and conclusions which may potentially have direct impacts on energy and commodity firms including:
- Potential to end many of the emergency crisis measures e.g.the infra-marginal revenue cap and retail price setting rules
- Retain certain aspects of these rules within the longer-term structural adjustments in the electricity market design proposals tabled by the Commission in March.
The EC notes that the measures, including electricity demand reduction measures, the infra-marginal revenue cap, and retail price setting rules – contributed to a calming of the European energy markets. Consequently, given EU electricity prices are significantly lower than the record highs observed last year (prices have decreased to less than 80 EUR/MWh), the EC will not propose to prolon these measures.
At the same time, the report recalls that certain aspects of these rules have been included among the longer-term structural adjustments in the electricity market design proposals tabled by the EC in March.
As a reminder, and reiterated in the report, the EC calls out the following aspects of the energy measures which were included in the March design proposal:
Demand Reduction Measures. While no longer necessary in the short term and through the tools established by the Council Regulation, demand response is important for well-functioning electricity markets. For this reason, the Commission has introduced it structurally in its electricity market design proposal.
Transmission system operators to design peak shaving products. The electricity market design proposal enables transmission system operators to design a peak shaving product enabling demand response to further contribute to decreasing peaks of consumption in the electricity system at specific hours of the day (new Article 7a of the Electricity Regulation).
Design/Re-design capacity mechanisms to promote renewal electricity. The proposal also integrates the possibility for Member States to design or redesign capacity mechanisms to promote low carbon flexibility and to introduce new non-fossil flexibility support schemes in the electricity markets.
It also enables Member States to design their respective non-fossil flexibility mechanisms and objectives for demand response and storage tailored to the specific needs of their respective electricity systems.
Below-cost regulated retail prices to households and SME’s. Within the proposal, it allows Member States to introduce below-cost regulated retail prices to households and SMEs in case of a future electricity price crisis.
Member States may introduce, during an electricity price crisis, targeted price intervention for households and SMEs, including at below cost levels, for a limited volume of electricity consumption, and for a limited period of time.
