EUROFER (The European Steel Association) has cautioned that reform of the EU Electricity Market Design report continues to fall 'well short' of delivering the urgent solutions required to avoid further price spikes and 'overstates the potential of long-term solutions to redress the structural problems of the EU wholesale market'.
EUROFER argues that the benefits of renewables in the EU energy mix should be passed on to industrial consumers and citizens as quickly as possible.
The revisions, which were introduced by the Industry, Research and Energy (ITRE) Committee of the European Parliament, improve some elements but fail to address the root causes of high electricity prices and, therefore, hinder decarbonisation efforts and undermine the competitiveness of European industry, EUROFER says.
Axel Eggert, director-general of EUROFER, commented: “The text adopted by the ITRE Committee contains some steps forward to cope with emergency situations; however, we are still very far from what we need to effectively modernise the current system, which has shown all its limits in the current geopolitical context”. According to Eggert, “If we are serious about making the energy transition a success by switching to fossil-free electricity, we need a structural solution for short-term markets given their impact on long-term contracts”.
“The energy crisis is not solved yet: the EU must find short and long-term solutions to allow both energy-intensive industries and consumers to reap the benefits of a decarbonised electricity system, starting with wholesale markets."Axel Eggert, director-general, EUROFER
The ITRE's report introduces several improvements in dealing with new crises, such as clearer criteria to define emergency situations and the related possibility of member states to intervening in price setting for electro-intensive industrial consumers. In addition, the possibility for governments to partially reinvest revenues in the industrial transition within the framework of Contracts for Difference (CfDs), to couple CfD- funded projects with Power Purchase Agreements (PPAs) for targeted customers, and the renewed set of obligations for member states to remove barriers to access PPAs, are welcomed measures for the steel sector.
However, argues EUROFER, these instruments have a limited impact in bringing electricity prices down to a sustainable level in the short-term. Structural solutions still need to be found to ensure internationally cost-competitive electricity prices in the short term, beyond complex state aid compensation schemes.
Today, the steel sector consumes around 75 TWh of electricity per year. According to EUROFER’s estimates, the transition to low-carbon technologies for green steelmaking based on hydrogen will massively boost electricity consumption to 165 TWh by 2030 and up to 400 TWh by 2050. Over €30 billion of investments to produce low-carbon steel, based on green technologies with fossil-free electricity at its heart, could be at risk in the EU if operating costs are unsustainable due to non-competitive and hence unaffordable electricity prices in Europe.
“The energy crisis is not solved yet: the EU must find short and long-term solutions to allow both energy-intensive industries and consumers to reap the benefits of a decarbonised electricity system, starting with wholesale markets. We invite the European Parliament and the Council to hold an in-depth discussion and propose an impact assessment of alternative market designs to be carried out by the Commission shortly after the current reform”, concluded Mr. Eggert.