The European Union wants to better protect its citizens against volatile energy prices. Last year, after the start of the war in Ukraine, everyone noticed that electricity and gas prices rose enormously. Although prices have now stabilized somewhat and you have been able to take out a fixed energy contract again since last summer, the fact is that prices are still volatile and higher than before the war. There is a real chance that gas and electricity prices could skyrocket again during a cold winter. It is therefore not without reason that the ACM recommends concluding a permanent contract.
The EU, in turn, also wants to do something about this, and therefore reform the energy market at European level. The intention is for the government to enter into a contract with energy suppliers for the long term. These are contracts for difference (CfDs). These contracts offer energy suppliers a minimum price for electricity. If such a supplier decides to start a new renewable energy or nuclear energy project, they can agree on such a fixed price. If the current electricity price is lower than the agreed price, the government will make up the difference up to the minimum price. If the price is higher, the energy supplier must pay the difference between the market price and the minimum price to the government. By offering a higher price for electricity, energy suppliers have room to invest in CO2-free and renewable energy plants.
The principle of the current energy market remains the same: power supplies that supply the cheapest energy, such as wind energy, are used first. But if there is more demand or less wind, gas-fired power plants, for example, are used to meet demand. These are more expensive than renewable energy and therefore largely determine the price.
However, the Greens within the European Parliament are not happy with the new proposal. German MEP, Michael Bloss, said: ‘On the day of the historic agreement at the Dubai climate conference, the EU is actually giving a new fossil subsidy to coal-fired power plants. This makes the EU completely unreliable.’ Although most citizens will certainly be happy with more stable energy prices, I think people do not want this to be at the expense of the climate goals that the countries have jointly decided to maintain.