Call for contracts and derisking to be at forefront of electricity market design

If Europe hopes to accelerate decarbonisation and in turn competitiveness across its industries, policymakers need a radical rethink of electricity market design.

And that rethink should be carried out in conjunction with the players in the industrial sector.

That was the message from day two of the European Industrial Energy Days conference in Amsterdam, which brought together many of those players with policymakers, regulators and technology providers.

Indeed, Fabien Roques, Executive Vice President & Head of Energy Practice at Compass Lexecon, said the problem when discussing the future of market design was the word ‘market’.

“We should be talking about contract design and not market design.”

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Calling for a design “for different participants in the market”, he said: “We need an efficient, granular market price and we need a range of derisking mechanisms.”

He called for a sharper focus on certain contracts for particular participants, echoing a sentiment from day one of the conference, when Robert Andrén, Head of Strategy and Policy at Industrikraft – a consortium of 17 Swedish industrial companies – said: “We talk about industry as if it is one homogeneous thing: it is not.”

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This morning, Pierre Dechamps, Senior Advisor in FTI Consulting’s EMEA energy practice, also stressed that in Europe “we have several industrial sectors and they are not all in the same situation and they have different needs”.

This, he added, meant that there was already “an element of competitiveness between industrial sectors” instead of an approach to encourage collective competitiveness.

Martin Fourdrignier of ArcelorMittal said that the current electricity market design “does not work for us consumers – it works against us.”

And he added that following the launch of the European Commission’s Clean Industrial Deal, “I am not happy and I am not optimistic”.

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Roques highlighted that he believed higher energy prices in Europe were the new “normal”, which meant “policies will be needed to support electrification”.

“We have a problem that cannot be solved by the market – we need state aid.”

This was echoed by Benoît Esnault, head of unit Interconnections & European regulation at the French Energy Regulatory Commission, CRE.

“The role of the state is more important now than it was ten years ago.” He said previous market design focused on long time frames, whereas now, there was a need for adaptability based on lessons learned during those ten years, especially during the 2022 European energy crisis.

Laura Feleki, Global Product Manager of C&I at Kraken Tech, also called for a rethink, not just from policymakers but from all parties involved in the energy transition.

“We can no longer incrementally improve the energy system. We need to live in the now and leave the past behind. Unless we think about the problems in a systematic way we will not find the answers.

“We need system optimisation, not our current siloed models. We have a siloed industry all over: the more systemic thinking – the more solutions we will find.”

Originally published on Enlit World.