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European Union Energy Reform

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In 2023, there were many developments that deeply affected the global energy sector. In particular, the restriction of oil production by the Organization of Petroleum Exporting Countries (OPEC) had a major impact. In order to maintain the supply-demand balance and energy security in energy, a reform was signaled, including many issues such as health, agriculture and industry. The European Union (EU), in particular, has sought solutions to mitigate the negative impact of the Russia-Ukraine War on sustainable energy supply and to prevent growth in the sector.

On March 14, 2023, Brussels prepared a reform proposal to change electricity market rules to protect consumers from price increases and to expand the use of fixed-price electricity contracts.[1] The content of the proposal in question is quite broad. In this way, it is aimed to encourage long-term contracts with those who produce electricity from renewable energy sources, reduce the negative effects of fossil fuels, provide clean and flexible solutions to the system, promote renewable energy sources, ensure transparency and integrity in the electricity market and fair competition in Europe. Therefore, the European industry will be decarbonized, a green transformation will take place, and it will reach renewable and affordable energy. This will bring price stability in renewable electricity production and benefit both suppliers and consumers. [2]

Spanish Energy Minister Teresa Ribera announced on October 18, 2023 that the differences between France and Germany were resolved and EU members reached an agreement on the reform in the energy market. Minister Ribera stated in his statement to journalists that the most important factor was almost unanimity. Because only Hungary abstained on this issue. The agreement focused on a section of the law that explains how state aid can be used to support energy projects. The talks in question had been stalled for months due to Germany’s approach. [3] As a matter of fact, Berlin had concerns that the plan in question could disrupt competition and give an advantage to France, which has the second largest nuclear fleet in the world after the United States.

The EU, which initiated green transformation reforms before the Russia-Ukraine War, had difficulty meeting electricity demands after the war. The main difficulties in question are the deactivation of base power plants, the suspension of the nuclear energy program and the inability of renewable energy to produce sustainable production. Increasing production costs and the increase in investment costs per megawatt in solar and wind energy to millions of euros have disrupted investments in this field.

European Central Bank (ECB) President Christine Lagarde spoke at the Energy Transition conference held in Paris on 29 September 2023. The International Energy Agency drew attention to renewable energy at the conference organized by the European Investment Bank and the ECB. He pointed out that rapidly changing energy prices and permanent changes in energy markets may have significant effects on inflation dynamics. President Lagarde emphasized that the regular clean energy transition is for the benefit of everyone. He also reminded that natural disasters have become more frequent and severe due to climate change, and stated that the number of weather-related disasters has increased 5 times in the last 50 years: [4]

“If we do the green transformation wrongly, there will be high social costs.”

President Lagarde emphasized the need for investment by the majority of companies in the euro area within the scope of combating the climate crisis and green transformation reform, but added that these investments were postponed due to increasing financial costs. The EU states that, despite the creation of additional budgets in the reforms, it has made an additional expenditure of 792 billion euros since the Russia-Ukraine War to maintain energy stability and combat the negative effects of the war. [5]

The main investment areas for the EU are; The development of energy storage, hydrogen-based production and consumption, solar energy, wind energy and fusion technologies. The continuation of the International Thermonuclear Experimental Reactor project on fusion energy has become the project that comes closest to the dream of an “energy-free world”, even though it shows that fusion in this field is still at its infancy. There is a budget of approximately 2 trillion dollars to complete the relevant targets by 2040.

The following statements were used in the statement made by the EU regarding the reform: [6]

“This reform, which aims to stabilize long-term electricity markets, aims to popularize two-way contracts for difference (CfDs) by supporting the market of energy purchase agreements and increasing the liquidity of the forward market. Two-way contracts for difference will be used to invest in new energy production facilities such as wind energy, solar energy, geothermal energy, unreserved hydropower and nuclear energy. This will provide predictability and assurance. The rules for two-way CfDs will only apply after a three-year transition period (five years for offshore hybrid asset projects linked to two or more bidding zones) after the regulation comes into force, in order to maintain legal assurance for existing projects.”

In this context, in the post-G20 period and before the 28th United Nations Climate Change Conference, the EU has made progress on the issues it has committed to and has placed energy stability on a legal basis. It has become possible to say that the decisions taken on this issue will set an example on a regional and global scale. The completion of legal reforms, which are the most important component of energy stability, has once again been shown as the formula for economic independence in this field.


[1] “AB Elektrik Piyasası İçin Reform Teklifi Verildi”, AA, https://www.aa.com.tr/tr/dunya/ab-elektrik-piyasasi-icin-reform-teklifi-verildi/2845489, (Erişim Tarihi: 14.03.2023).

[2] Same page.

[3] “AB Üyeleri Enerji Piyasası Reformu Üzerinde Anlaştılar”, EkoTürk, https://www.ekoturk.com/haber/ab-uyeleri-enerji-piyasasi-reformu-uzerinde-anlastilar/, (Erişim Tarihi: 18.10.2023).

[4] “AMB’den Enerjide Dönüşüm Vurgusu”, Bloomberg, https://www.bloomberght.com/amb-den-enerjide-donusum-vurgusu-2339281, (Erişim Tarihi: 29.09.2023).

[5] “Avrupa, 2040’ta 2 Trilyon Dolarlık Yatırımla Tamamen Yenilenebilir Enerjiye Geçebilir”, Yeşil Haber, https://t.ly/SaffM, (Erişim Tarihi: 7.10.2023).

[6] “Reform Of Electricity Market Design: Council Reaches Agreement”, European Council Council of the European Union, https://www.consilium.europa.eu/en/press/press-releases/2023/10/17/reform-of-electricity-market-design-council-reaches-agreement/, (Erişim Tarihi: 17.10.2023).

Ömer Faruk PEKGÖZ
Ömer Faruk PEKGÖZ
Gazi Üniversitesi-Enerji Sistemleri Mühendisliği