An Iberian answer for Europe | Opinion | EUROtoday

Europe is aware of properly the havoc attributable to power crises. It is sufficient to look again 5 years to recollect what occurs when the discount within the provide of fuel will increase its worth and this improve in worth is instantly transferred to the electrical energy markets, the place fuel vegetation proceed to be decisive in setting costs. The improve in power prices drives inflation – additionally underlying inflation – and finally ends up making the tightening of financial coverage inevitable.

We are not looking for historical past to repeat itself, not even in power issues. Structural options ought to begin from a transparent analysis. At the origin of the rise in power costs is, on the one hand, the dependence on fossil fuels and, on the opposite, a design of the electrical energy market that’s nonetheless too depending on short-term markets, which mission the prices of the most costly know-how onto all electrical energy era applied sciences.

Therefore, structural options ought to contain accelerating the deployment of investments in renewables, storage, networks, and electrification, all of that are important to remove fossil fuels from our power eating regimen. And they need to additionally undergo a extra decided dedication to auctions of long-term power contracts, which make it potential to scale back the price of renewable deployment, stopping electrical energy costs from being contaminated by the oscillations of fossil fuels, in keeping with geopolitical swings. Decarbonizing isn’t solely a local weather goal: it’s also competitiveness and strategic autonomy.

But what to do within the meantime to keep away from a brand new worth spiral? Spain and Portugal already confirmed the way in which over the past power disaster. When it involves responding to an emergency, the perfect insurance policies aren’t essentially the perfect designed, however the best. And the Iberian answer was efficient as a result of it attacked the issue the place it actually arises: it de facto minimize the over-remuneration of applied sciences equivalent to nuclear, hydraulic or renewables that they promote to the market, which don’t devour fossil fuels, however do profit from electrical energy costs inflated by the rise in fuel and CO2. Furthermore, due to the Iberian answer, the discount within the worth of electrical energy not solely contributed to containing inflation in Spain, but in addition had optimistic distributional results, offering comparatively extra aid to lower-income households. On the opposite, making an attempt to resolve the power shock solely with public spending or tax cuts reduces State sources and shifts the price to taxpayers, with out fixing the true underlying downside.

The Iberian answer additionally had a collateral impact: by lowering the worth of electrical energy in Spain, it elevated exports to France, growing gas-fired electrical energy era in our nation and benefiting French customers who had entry to electrical energy whose worth was being partially backed by Spanish customers.

An Iberian answer for all of Europe would keep away from cross subsidies between nations, scale back inflationary stress on the continent as an entire and the chance of rising rates of interest, assist shield the competitiveness of European trade at a key second, and take away stress on the weakening of local weather insurance policies as a strategy to scale back power prices.

Europe immediately faces a strategic choice. It might go for nationwide responses that quickly relieve power price stress, however fragment the market and warp electrical energy exchanges. Or it could actually undertake a standard answer that, with out committing public sources, prevents electrical energy from turning into costlier because of a nonetheless extreme dependence on fossil fuels and a market design that amplifies its antagonistic results on firms and households.

While the struggle lasts, and whereas Europe strikes in direction of the decarbonization of its economic system – an goal that will probably be tough to attain with no reform of electrical energy regulation – allow us to go for an Iberian answer for all of Europe.