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Why we need a reform of the EU electricity market and how we can make it more socially just

By Aleksandra Baranska, Aislinn D'hulster, Joanna Maćkowiak-Pandera, Stephen D. Thomas, Ludovic Voet, and Willy De Backer - European Trade Union Institute, April 27, 2023

The current energy crisis has put into question the functioning of Europe’s electricity market, and more specifically the impact of gas prices on the price of electricity. In this regard, two factors play a key role: the share of gas generation in the European electricity mix, and the price-setting mechanism. The energy crisis has shown how important these processes are when it comes to understanding the recent skyrocketing energy prices and the overall inflation they have led to, yet they are very complex and difficult to fully grasp.

This year the European Union is planning a thorough reform of the European electricity market. This ‘fifth energy package’ aims to provide solutions to the shortcomings in the design of the market which have been exposed by the energy and inflation crisis.

This ETUI lunch event aims to demystify the functioning of the energy market by breaking down the practical and technical puzzle of the ‘marginal pricing’ system, the nexus between electricity and gas prices, and the incentive mechanisms for renewable energy sources. This exercise of clarification on how the market works will also help us judge to what extent the foreseen EU electricity market reform is going to be socially just, and what further adjustments could be made in this respect.

Disclaimer: The views expressed here are not the official position of the IWW (or even the IWW’s EUC) and do not necessarily represent the views of anyone but the author.

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