The European market unifies the final price of all the energy purchased at the price of the most expensive. Features make energy produced from fossil fuels, such as gas, significantly more expensive.
The European energy market system is in question. The current electricity price crisis, boosted by the booming price of gas, the company bill is increasing and homes across the continent.
The current purchasing system favors the acquisition of energy from sources that do not emit carbon into the atmosphere. In this way renewable energy and nuclear energy are often the cheapest in the daily shopping.
In return for this, the market makes the purchase of energy from the burning of fossil fuels more expensive such as coal or gas through the CO2 emission rights system.
Market characteristics also establish a single price for all purchased energy, renewable or not. This digit marks the price of the last unit of energy that is purchased.
Because the electricity grid of European countries still depends on energy from fossil fuels, the electricity that comes from polluting sources is what sets the final price of all electricity.
This situation can be perfectly observed in France. About 70% of its energy production comes from nuclear energy, much cheaper than that from fossil fuels
However, due to the need to buy gas to satisfy national demand and as this fuel is at those all-time highs, the final price of all energy is set by the price of gas.
Traditionally, this system has helped to maintain the supply of electricity “at very low prices“, according He says Jan Cornillie, Research Associate at the European University Institute, at Financial times.
Nevertheless, the extremely high demand that gas is experiencing in international markets it has made this fuel more expensive to all-time highs, thus dragging down the electricity bill of European consumers.
But Cornillie also argues that the current energy price crisis, stemming from the boom in gas demand, now “is not working in our favor“.
Europe defends the current model even if it involves an extraordinary increase in the electricity bill
At the center of the gaze of governments, households and companies is the European Commission. The Community Executive has defended the current price system at all costs although he has also been open to considering solutions that help lower the electricity bill.
The European Union is immersed in a profound process of ecological transformation through the search and investment in energy that comes from renewable sources, such as solar or wind, or that does not emit greenhouse gases, such as nuclear.
Far from wanting to face a reform of the system, the Commission has published a “Toolbox“with a limited number of options to deal with the current crisis.
Member States can activate a direct financial support to vulnerable households, tax exemptions or temporary tax breaks. But it does not contemplate the possibility, suggested by countries like Spain and France, of reforming the system.
But not all European governments, as is the case of the Dutch or the German, according to the Financial times, are about to start rounds of meetings and negotiations to reform the entire system due to a problem that is expected to Will Solve Itself From Spring 2022.
Kadri Simson, EU energy commissioner, has defended the current energy system for its usefulness in redirecting countries’ energy investments towards renewable or non-polluting sources of generation.
As a possible real solution to a problem that is classified as “transitory” by the experts contacted by the Financial times there is the ability to acquire and store gas on a large scale. In this way they could face some of the extraordinary ups and downs of the electricity market like the current one.
With winter just around the corner, the average strategic gas reserves of European countries are at 78%. Spain has the national reserve slightly below the community average with the national reserve at 76%, according AGSI +.
Brussels has listened attentively to some of the requests from governments such as that of create a unified gas purchasing system, similar to the successful vaccine purchase system.
This article was published in Business Insider Spain by Íñigo Palacio.