EU electricity market reform on the cards?

HOT TAKE: Von der Leyen changes her tune on marginal price setting

Ursula von der Leyen, president of the European Commission, has performed a notable U-turn by admitting something that Energy Flux has been saying for some time: that price-setting arrangements in EU power markets are broken. She was quoted as telling EU parliamentarians:

“This market system does not work anymore. We have to reform it… This is the task that the Commission has taken over now. This is not trivial, this is a huge reform. It will take time, it has to be well thought through. But we must step forward to adapt our electricity market to the modern conditions.”

I decided to flag this because her comments come just weeks after ACER, the EU’s Agency for the Cooperation of Energy Regulators, concluded that the current design – using pay-as-clear (PAC) in power price auctions – is working well and “worth keeping”. Here’s my hot take on what a U-turn might mean in practice.