How can the EU overhaul its electricity market to lessen energy usage and better protect consumer energy bills?
The short term swings in fossil fuel prices have wreaked fiscal havoc on households and forced some industries to close.
Foremost, they must overhaul the way power plants sell electricity as part of market reform. As a beginning, the EU must expand Europe’s use of long term contracts that provide power plants with a fixed price for their electricity, known as “contracts for difference” (CfD), and power purchase agreements. Expanding these types of contracts would create a buffer between energy consumers and volatile prices in short-term energy markets, yielding more stable energy bills for households and companies.
Such an approach targets reductions in price volatility when there are more intermittent renewables, nuclear, and hydro in the energy mix. Stability for consumers can likely be achieved through:
- introducing specific EU rules for CfDs and leaving it up to national governments to decide to use them
- requiring new power plants that receive state support to sign CfDs
- allowing national governments to impose CfDs on certain existing power plants — but would they do so and devote much-needed investment in renewable power?
The Commission has considered a range of other changes, such as making it easier for consumers to choose fixed-price power contracts to reduce their exposure to short-term price spikes or extending a temporary EU measure which claws back windfall revenue from non-gas generators. Right now, EU countries and lawmakers are negotiating such final power market reforms. The end result is unknown, as, with all these schemes, someone has to assume the long term credit risk to make the scheme viable.
France and Spain have already called for an expansion of CfDs for renewable and nuclear generators.
“We need to make the electricity market design fit for the future, allowing it to deliver the benefits of affordable clean energy to everyone,” EU energy commissioner Kadri Simson said.
Motivational Plan to Lessen Energy Usage
Intrinsic motivation is when you engage in a behavior because you find it rewarding — you perform an activity for its own sake, as the behavior is its own reward. Extrinsic motivation is when we are motivated to perform a behavior or engage in an activity because you want to earn a reward or avoid punishment.
Britain’s National Grid (NG.L) isn’t relying on consumer intrinsic behavior to lessen energy usage, which is at crisis levels. Homes could face 3 hour rolling power cuts if the country is unable to secure enough gas and electricity imports.
Instead, NG.L announced this month that it would pay customers to use less power on Monday and Tuesday evenings.
It’s the first time NG.L has used such a scheme designed to help prevent power shortages. More than a million households and business are signed up to the Demand Flexibility Service (DFS), which rewards people, usually via a bill price reduction, for turning off appliances such as ovens and dishwashers during a specific period when electricity demand is high. Now the DFS is part of a toolkit to help prevent cuts.
This new service has had a pilot but never been previously implemented in a live situation. It would run from 5 pm. to 6 pm, it said, adding that the move did not mean electricity supplies were at risk and advised people not to worry.
The measures were announced in order to “ensure that everyone gets the electricity they need,” Craig Dyke, head of national control at National Grid ESO, said, as reported by Reuters, adding that 26 suppliers had signed up for the scheme.
Commission Refers Bulgaria & Slovakia to Court to Push Renewable Energy Development
The Commission is taking legal steps to ensure the development of renewable energy across the EU and to reduce greenhouse gas emissions, energy dependency, and high prices. It decided to refer Bulgaria and Slovakia to the Court of Justice of the European Union with a request to impose financial sanctions in accordance with Article 260(3) Treaty on the Functioning of the European Union for failing to transpose the EU’s Renewable Energy Directive (Directive (EU) 2018/2001) into national legislation.
In accordance with the TFEU, promoting renewable forms of energy is one of the goals of the Union energy policy. That goal is pursued by the Directive. The increased use of energy from renewable sources constitutes an important part of the package of measures needed to reduce greenhouse gas emissions and comply with the Union’s commitment under the 2015 Paris Agreement on Climate Change following the 21st Conference of the Parties to the United Nations Framework Convention on Climate Change (the Paris Agreement), and with the Union 2030 energy and climate framework, including the Union’s binding target to cut emissions by at least 40% below 1990 levels by 2030.
The Union’s binding renewable energy target for 2030 and Member States’ contributions to that target, including their baseline shares in relation to their national overall targets for 2020, are among the elements which have an overarching importance for the Union’s energy and environmental policy. Other such elements are contained in the framework set out in the Directive, for instance, for the development of renewable heating and cooling and the development of renewable transport fuels.
Member States were required to transpose the Directive by June, 2021. The Commission has been providing support to the Member States to transpose the rules, but Bulgaria and Slovakia have so far failed to notify any transposition measure. In July, 2021, the Commission sent a letter of formal notice to both Member States. To date, Bulgaria and Slovakia are the only two Member States who have failed to notify any transposition measure. Therefore, the Commission is referring both Member States to the Court of Justice of the European Union.
Renewable energy is a key element of the European Green Deal as well as a central pillar of the REPowerEU plan. As guardian of the Treaties, the Commission has to ensure the full and correct transposition of EU law into national legislation. When it comes to the enforcement of the revised Renewable Energy Directive, the Commission has so far initiated infringement procedures against all 27 Member States for failure to notify complete transposition measures of the Directive by the deadline of June, 2021.
Bosnian Farm Makes Electricity from Animal Waste
Let’s end with a bit of a lighter story from Europe about the pursuit of clean and affordable energy.
A high-tech dairy farm is among the first in Bosnia turning biogas from animal manure into electricity, as it aims to become self-reliant at a time when high energy prices pose a risk to the subsidy-dependent agricultural sector. The project at Spreca farm, in the north of the coal-rich Balkan country, is in line with the government’s efforts to gradually switch its energy production to renewable sources.
It is able to produce more electricity in an hour than the average household consumes in a month. Energy production started in September, operating at 50%-60% capacity due to regulatory requirements, but it will be able to produce 600 kilowatts per hour once fully operational.
It comes at a time when prices of fertilizers, food, and energy have spiked following Russia’s invasion of Ukraine.
The idea to turn the mixture of cow and chicken feces, corn silage, and other organic waste available at the farm into biogas was born almost a decade ago, farm director Said Karic told Reuters. “This is a step towards aligning with the European standards … and represents an economic model that can be developed to increase the economics of the business, bearing in mind that primary agriculture production is low profit.”
It is the first such project in Bosnia’s autonomous Bosniak-Croat Federation, according to Karic and project leader Mirsad Tursunovic.
“It was envisaged to crown the existing processes at the farm,” Karic said at the farm owned by the Sarajevo Milkos dairy industry, which covers 800 hectares of its own and leased land and has capacity for 2,000 high-yielding cattle. The scheme at the farm, which already uses automation and high tech machinery, is government-backed.
Bosnia, where energy production accounts for about 20% of its GDP, is the Balkans’ sole electricity exporter, with about 60% of it produced from coal-fired plants and the rest mainly from hydropower. Its two regions, the Bosniak-Croat Federation and the Serb Republic, have pledged to increase the share of energy produced from renewable sources by 2030 but the energy crisis triggered by the war in Ukraine has slowed those plans.
The thermal energy created during the fermentation of the biogas is also used to heat some farm buildings. “Our long-term plan is the construction of greenhouses that would be also heated by this thermal energy,” Karic said.
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