Expert Paper – Single Market for Energy

European markets for gas and electricity were successfully established in the last 20 years and have generated clear benefits for European consumers and industries. However, these markets have come under pressure since the end of the summer in 2021, which was exacerbated by the current geopolitical context, in particular the war in Ukraine.

Given the economic consequences of the sharp increase in gas and electricity prices, questions on the security of supply and energy market design are at the top of the political agenda. Currently, political sentiment is slanted towards a comprehensive overhaul of the marginal pricing system. ERT believes there is a case for targeted improvements to the market functioning, but not a complete transformation in the short-run.

Strengthening the Single Market for energy is crucial to successfully address both short-term and long-term challenges in the energy transition (e.g. security of supply, affordability, and decarbonisation). The current fragmentation and country-by-country approach on support schemes (for biofuels or hydrogen for example) or in response to rising energy prices threaten the overall EU cohesiveness and the implementation of the EU Green Deal.

The response to the current energy prices crisis must be taken at the European level to maintain the cohesiveness of the Single Market. In that sense, the ERT welcomes the approach taken by the Commission to carefully address any power market design reform with a preliminary impact assessment study. Since the corresponding legislative process will inevitably take time, ERT also supports the need for rapid emergency response, such as the recent Council Regulation to address high energy prices, provide liquidity to the market and protect consumers and industries by targeted support measures.