Less than two years have passed since the European Union adopted its latest reform of the electricity market. In Italy, the legislative decree transposing the new framework entered into force just ten days ago. Yet Brussels is already signalling that a further revision of the electricity market design could be on the table.
Debate over marginal pricing within the electricity market
The announcement came directly from European Commission President Ursula von der Leyen at the close of the informal retreat of the Twenty-Seven on competitiveness in Alden Biesen.
Attention has turned, albeit indirectly, to one of the most complex features of the current system, the marginal pricing mechanism, which continues to drive up the price of all electricity, including renewables.
“We had an intense discussion about a simple fact,” von der Leyen said. “If we look at last year’s averages, renewables had a cost of €34 per megawatt hour, nuclear between €50 and €60, while gas reached €100. The debate is heated over why our merit order system ultimately rewards the most expensive resource, making it the factor that determines the final price. On this point, I want to be very clear, we have not yet reached a conclusion. However, at the next European Council, I will present several options and analyses to assess whether the time has come to proceed with a reform of the market structure or whether the current configuration remains valid. In addition, we will proceed as planned and as required by law with the review of the EU ETS.”
For now, any new reform of the electricity market remains hypothetical. However, as several heads of state continue to advocate for further changes to the electricity market design rules, concerns are mounting.
According to WindEurope, “the last thing Europe needs right now is to weaken clean energy investment signals.” The association representing Europe’s wind industry argues that reopening the market structure would freeze renewable investment and entrench excessive dependence on imported fossil fuels.
WindEurope CEO Tinne Van der Straeten stated: “European leaders rightly discussed how to reduce electricity prices to safeguard Europe’s industrial competitiveness. They are right in saying this will require much more renewable energy. But tampering with the EU market structure is the wrong response. The Antwerp and Alden Biesen summits were meant to mobilise investment and strengthen competitiveness. It would be deeply ironic if they ended up freezing the clean energy investment Europe needs to remain competitive. Europe has all the tools to stabilise energy prices and protect consumers from volatility. Together with the EU and national governments, we must now agree on targeted measures to align electricity supply and industrial demand.”
It should be recalled that the electricity market design rules that entered into force in July 2024 stem from both amending Directive EU/2024/1711 and amending Regulation EU/2024/1747.
