More than a year after Spain pressed for changes to its electricity market, the European Commission announced a shift at the end of August, with its president remarking that the method for setting prices would change in relation to this energy source. The significance of that announcement faced scrutiny as Thursday’s agreement arrived and some critics argued it did not constitute a full reform. The Parliament’s rapporteur, during the Strasbourg briefing on the pact, outlined that the proposal reflects the Parliament’s push for the Commission to scrutinize the current framework. The aim is to assess how well the present structure works in the near term for electricity markets, even during crises or emergencies, according to Nicolás González Casares. He pointed out that the discussion centers on how to address possible inefficiencies within the internal electricity market and whether alternate remedies or tools could be deployed in urgent situations based on international experience and ongoing developments within the Union’s energy landscape. Where appropriate, the Commission should accompany this assessment with a formal report on a bill proposal, Casares noted, describing the agreement as achieved in record time, just nine months after the Commission’s March proposal.
There is now room to consider a possible market review following the agreement, which targets changes to the system without erasing the core daily market structure. The essence of Thursday’s deal is to emphasize long term contracts with the goal of easing the impact of energy costs on the daily market, a move tied to the formulaes used in Spain and intended to reduce price spikes. The practical effect of this push will depend on decisions made by individual member states and their energy producers.
The system that protects consumers by linking prices to the most expensive available technology, currently gas, will continue to serve as the reference point. In other words, if a new energy crisis arises next year sparked by supply constraints similar to past episodes, the same dynamics will influence prices. The agreement includes a mechanism for a potential price ceiling that could reach up to 180 euros per megawatt hour, with the Council required to declare an energy crisis upon the Commission’s proposal, among other measures.
The marginalist approach was designed to promote renewable energy during a period when electricity grids relied heavily on fossil fuels. The logic was that every technology should be priced according to its cost, ensuring investment in renewables. Yet in a grid dominated by renewables, that logic becomes less clear. Former energy commissioner Miguel Arias Canete, who has spoken at university events, warned that this reform will not be the last step in reshaping the market. Acknowledging that the energy transition changes the playing field, he urged patience and continued reform to adapt to new realities.
Currently, supporters describe the reform as a continuation of the prior approach. But as the energy mix shifts toward higher renewable shares, the next Commission will need to rethink how the market is structured when most generation comes from renewable and clean sources. The marginal system may not work as effectively in a landscape with widespread renewables, Arias Cañete cautioned at the time. He noted that not all countries share the same pace of renewable growth, so urgency varies. In Spain, the milestone of half of electricity production coming from renewable sources would be reached this year, yet that scenario is not universal. For instance, in France, nuclear energy remains a dominant factor in the mix, highlighting divergent national profiles within the union.