Electricity market reform

Currently, the steel sector consumes about 75 TWh of electricity per year

The review of the EU electricity market structure needs a deeper and more complex approach, according to the Association of European Steel Producers (EUROFER). It is stated in the press release on the organization’s website.

The European Commission published a proposal on the reform of the electricity market design on March 14. The reform aims to expand the role of long-term instruments such as power purchase agreements (PPAs).

As EUROFER noted, it remains unclear how industrial consumers will be able to access the large amounts of renewable and low-carbon electricity needed for decarbonisation in the coming years.

“The European electricity market is experiencing a significant price shock, just when our steelmakers accelerate their decarbonisation efforts by increasing exponentially direct and indirect electrification,” emphasized Axel Eggert, CEO of EUROFER.

He added that this review is the last chance to urgently increase capacity, ensuring availability and stability. However, in its current form, the proposed changes do not meet the expectations of industry and society. According to Axel Eggert, a deeper and more comprehensive approach is required and we are committed to cooperating with co-legislators to deliver such result.

Currently, the steel sector consumes about 75 TWh of electricity per year. The transition to breakthrough low-carbon technologies could increase this consumption to around 160 TWh by 2023, and to 400 TWh – by 2050.

EUROFER believes that the reform should strive to ensure affordable prices in electricity short-term markets, improve access to long-term contracts and risk mitigation options for energy intensive industries. At the same time an effective and timely redistribution of excess market revenues in support of European consumers is necessary.

As Axel Eggert noted, the experience of the last months shows that long term markets are linked to the short-term markets pricing signals and unable to effectively provide a structural solution for energy-intensive industries. Therefore, all options concerning the functioning of the wholesale market need to be assessed in the reform in order to improve the overall cost effectiveness of the energy system. Other non-market instruments should also be allowed to support industry competitiveness in the face of global competition, such as regulated electricity tariffs for energy-intensive industries or exemptions from fees and taxes.

Joint borrowing is currently not an option to help EU member states finance the green transition. This was announced by the Commissioner for the Internal Market Thierry Breton at a recent press conference, informs Euractiv. He ruled out another round of joint EU debt to finance the development of green projects under the relevant draft law (Net-Zero Industry Act), which will be presented soon.

Breton believes that it will be easier to find a political agreement within the framework of the revision of the MFF (EU long-term budget). The MFF, under which the European Union currently operates, was approved for the period 2021-2027 and is accompanied by a joint debt instrument of €800 billion, known as NextGenerationEU, designed to recover the economy after COVID. The MFF should be revised in July of this year.

As GMK Center reported earlier, the European Union aims to expand the use of fixed-price contracts to protect European consumers from price fluctuations. According to the project, contracts for difference (CfD) should be used to support new investments in renewable (wind, solar, etc.) and nuclear energy.