Christopher Jones: “Marginalist price system for energy is the least bad”

Christopher Jones is a specialist competition lawyer at Baker & McKenzie’s Brussels office, after spending 30 years in senior positions in the European Commission’s energy field. He was a supporter of the 20/20/20 Agenda, although no one thought it was possible to achieve these goals. This week, he participated in a debate organized by the Círculo Ecuestre de Barcelona, ​​where he, along with other experts, applauded the electricity reform planned by Brussels against Spain’s “interventionist” proposal.

What is your opinion about the proposal? Brussels about electricity market reform?

– The offer is very good. It basically consists of three parts. It maintains the marginalist price system as it has in the last 30 years, which is positive. In addition, it establishes a structure that allows the development of renewable and nuclear energies through the market, that is, in which companies compete in the market and the market decides this development, and a support mechanism, which is contracts, is established. for the difference. In other words, the proposal maintains the role of the market and modernizes it. As long as this is the case, it’s positive, but some member states want to return to a regulated market.

-This is the case of Spain, which is based on the intervention. hydraulic and nuclear NO?

-Yes. In 2013, the Government set the price of renewable energy through aid for every kilowatt. Very high income levels have been achieved and some governments have made retroactive changes to the model that have had a devastating effect on the market. This is because it is based on capital investment: if you change the rules during the game, what you are doing is destroying investor confidence. For this reason, the Commission declared in its last directive that these retrospective changes are illegal and that prices should be determined through competition in the market.

– But is the marginalist system justified when there are country-to-country differences in the energy ‘mix’?

-Spain is not that unique. Each member country has its own ‘mix’. For example, Denmark has more renewable energy than Spain, and there are many member states investing in renewable energy, and others like Poland or the Netherlands invest in nuclear energy. But the truth is that everything purchased in our society is based on a marginal price definition, and electricity is no different from any other product. As a professor at the University of Florence, we did an experiment with MIT on different pricing systems, but in the end none works better and we can say that the marginalist system is the least bad system.

– What do you think about the Iberian exception or mechanism that limits the price of the gas to be produced? electric? Should he stay?

– Only Spain and Portugal requested. There must be a reason why no other European country is interested in such a system. The mechanism defined by the EU has worked well for the rest of the countries and they do not need another additional mechanism. The price of gas is now 40 euros, slightly higher than two years ago, but the price of electricity will continue this trend. Gas tanks are fuller than ever, which is a positive horizon, and what it does is change these mechanisms, remove incentives from investors and thus have no positive impact.

-And Brussels seeing gas and nuclear as ‘green’?

-This is not so. The rules of the so-called natural gas taxonomy are so restrictive that they rightly make it very difficult to qualify for new investment. In nuclear too, there are states that can choose nuclear technology with high limits but without carbon emissions, then it depends on the view on the technology. This taxonomy strikes a pretty reasonable balance.

As a supporter of the 20/20/20 Agenda, how do you see the ecological transition in Europe?

-When the targets were set, they told us that we were crazy, that it was not possible, that solar and wind energy were expensive and unstable energies… The truth is, they worked and their cost was reduced by 75%. The reason why renewable energy is now on the move around the world is because of what the EU has done and Europeans should be very proud to have this initiative. If this is not done, it will not be possible to achieve the 2050 targets, and if Europe does not, who will? It is important for Europe to do this and show that it can be done. All is well in all this.

-After the Barcelona-Marseille hydro canal, will we see more conversions from gas pipelines to hydro canals?

-Yes. We must create a transport network in Europe. For example, in Belgium it will not be possible to produce hydrogen from renewable sources and they will have to import it. If it can be produced in North Africa it will need to be shipped to Europe and Germany and other countries will buy it and so there must be a hydrogen supply network and we will see all existing pipelines to transport the gas be converted. and adapted to carry hydrogen. In any case, it should be noted that if electricity can be used directly, there is no reason to use hydrogen because electricity must be used to produce it. This is the most efficient thing to do.

-What is the forecast for the gas price?

The price of gas is the price that determines the price of electricity and will continue to be so. We don’t know for sure but it looks like we will be fine next winter and now is the time to focus on the future and see how we can increase investment in renewable energy because that will ensure supply security and price stability. The debate we’re getting into is last year’s debate, and we need to focus on what’s going to happen.

Source: Informacion

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