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September 26, 2022

B. Antonia

Is The End Of The EU Electricity Market As We Know It In Sight?

Is The End Of The EU Electricity Market As We Know It In Sight?

Post last updated: October 28, 2023

In the Czech talk show Questions by Václav Moravec, the local industry and trade minister Jozef Síkela and his predecessor Karel Havlíček discussed measures for tackling the high energy prices in Europe.

Following are highlights translated from the original article on CT24.

Proposal For New Price Calculations

Síkela mentioned discussions about separation of gas and other sources. The electricity price would be calculated by averaging the prices of the individual sources and their volume (share of total generation). This would result in a dramatic reduction in prices. So there would be a separate market for gas power and a separate market for other sources, such as coal, minister Síkela outlined.

Karel Havlíček, Deputy Chairman of the Czech Governmental Research, Development, and Innovation Council, does not think that this proposal will pass in the EU. In his view, the system for setting prices on the European stock exchange should be changed and electricity producers should be relieved of the burden of emission allowances, at least temporarily. However, according to the former head of CEZ (Czech electricity producer), Jaroslav Míl, this preserves the dysfunctional system of the European energy exchange and the model that caused the current crisis.

Absurd Stock And Spot Market Trading

Míl believes it is important that selling prices in individual countries should be based on the cost of the energy mix in that country. The market reform should be that at least 80 percent of supplies should be based on bilateral and long-term contracts, at least 10 years. Not on 'absurd stock and spot market trading'. In this context, he criticised the current price linkage to the Leipzig stock exchange, which he considered to be dysfunctional and manipulable. He would also consider it appropriate to separate the prices of electricity produced by gas-fired power stations from those on the market. However, he pointed out that the Germans do not want this. Overall, he would recommend increasing independence from Russia and from gas transit from Germany.

Electricity prices should then include production costs plus a reasonable profit. Establishing a state-owned trader would also be a way to achieve this, he believes. These steps, he said, would "save" prices for 2024 and beyond and also offer companies a long-term outlook.

New Energy Concept And New Gas Supplies To The Czech Republic

Síkela also stated on the programme, without further details, that he was preparing a completely new energy concept. He criticized that previous governments have not come up with any changes in the energy mix since 2015. He mentioned that the share of renewables was decreasing.

Síkela mentioned that his ministry is now working on new gas supplies to the Czech Republic. He is also planning to expand the capacity of the TAL pipeline so that we can wean ourselves off the Druzhba pipeline. Although the Czech Republic is ready to finance this itself (at a cost of about CZK 1.5 billion), it hopes to get European money for it.

The Czech Republic has also resumed cooperation with Poland on the Stork II pipeline, which would link the two countries. The minister estimated the cost of this at eight billion.


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