In EURACTIV, Lion Hirth and Christoph Maurer write on the benchmark price for energy proposed by the Spanish and Portuguese governments.
They warn that government intervention in the wholesale energy market could lead to increased consumption of fossil gas, inflated gas prices, and fewer incentives for investment into renewable energy.
After the failure to reach a consensus on market intervention at the European Council summit in March, the Spanish and Portuguese governments proposed a unilateral ‘production cost mechanism’ to reduce wholesale electricity prices. The intervention has been leaked to be presented as a subsidy of natural gas and coal burned in power stations.
As stated in the article, “the subsidy will be implemented as a reimbursement based on the electricity produced, assuming a conversion efficiency of 55% to fill the gap between the daily gas prices and 30 €/MWh.”
Hirth and Maurer write on the future adverse effects the proposal could have, including the increase of gas consumption and gas prices, larger payments to Russia, and a decrease in investment into much-needed renewable electricity generation.
Read the full article by Lion Hirth and Christoph Maurer in EURACTIV here.
Views expressed may not necessarily reflect the views and values of the Hertie School.
Contact
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Lion Hirth, Professor of Energy Policy