Europe prepares to limit the maximum ceiling on the price of electricity

The European Agency of Energy Regulators (ACER) has set to work to put a stop to the escalation of prices that is being registered in electricity.

The agency is preparing a reform of the automatic review system for maximum price limits to reduce the risk for both operators – due to lack of liquidity – and consumers due to the danger of blackouts.

ACER anticipates that electricity prices will remain high in the coming months and, for this reason, qualifies this review that it is launching as “high priority” to try to curb escalation in times of maximum tension.

The objective of the revision is to limit the frequency of these increases in the maximum compensation price in the spot markets, allowing consumers and participants to gradually and better adapt to the situation of scarcity in the market.

At the moment, since last May, the maximum prices have already increased by 66%. Specifically, on May 10, 2022, the ceiling prices for electricity increased from 3,000 euros to 4,000 euros/MWh after the levels reached on April 3 in France of 2,712 and 2,987 euros/MWh.

Subsequently, on August 16, 4,000 euros were reached in three Baltic zones (Estonia, Latvia and Lithuania), which has led to this maximum being increased again to 5,000 euros in September.

Containment measures

According to the regulatory body, these price spikes may be more frequent if sufficient cross-border interconnection capacity is not made available – for which an appeal has already been made to carriers such as Red Eléctrico – or if mechanisms are not introduced in the market response to demand, an extreme in which they are already working with contingency plans and with the requirement of the European Commission to reduce consumption during peak hours by 5%.

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Given the forecast of high prices for this winter, on September 2, ACER urged the Nominated Operators of the Electricity Market -in the Spanish case Omie- to present proposals to modify the methodologies for Assigning Capacity and Management of Congestion related to the Harmonized Maximum and Minimum Clearing Price (PMCM) methodology for Single Daily Coupling (SDAC) and the Harmonized Maximum and Minimum Clearing Price (PMCM) methodology for Single Intraday Coupling (SIDC).

For ACER, in addition to this urgent revision, it is necessary to carry out a complete revision of the methodology to take into account the upcoming start-up of the so-called SIDC auctions, as well as a recently developed automatic mechanism to adapt the maximum and minimum price limits continuous market clearing SIDC.

ACER thus intends to ensure that the modifications proposed by all NEMOs are in accordance with the Regulation on the internal electricity market, the guideline on capacity allocation and congestion management and comply with legal obligations. The supervisory body will assess whether the proposed modifications are adequate for their purpose, taking into account the exceptional situation of the market and its possible evolution.

As part of its review, the European energy regulator also wants to know the opinion of interested parties through a public consultation and a workshop to be held on October 3. The methodologies exposed for review define the maximum and minimum limits of the prices in the European daily and intraday electricity markets.

After receiving the proposals from the NEMOs on September 15, ACER is now carrying out a review of them. The supervisor formally has six months (until March 15, 2023) to make a decision, but the Agency intends to conclude much faster and for this it is carrying out a public consultation on the proposed modifications until next October 9. For this week, the Commission will also receive Esma’s report on the liquidity situation of the wholesale market.

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