PM Mitsotakis' letter to EU Commission president Ursula von der Leyen

23:35 13/9/2024 - Πηγή: iEfimerida

The letter of Prime Minister Kyriakos Mitsotakis to European Commission president Ursula von der Leyen follows:

Dear President,

I am writing to you about the issue of electricity prices. In the span of a few months,

wholesale electricity prices in Greece have more than doubled from 60 €/MWh in April

to 130 G/MWh in August.

This increase has occurred despite our remarkable progress

in accelerating the

energy transition. Relative to last summer, our generation from wind and solar

increased by 25%, while output from lignite fell 27%. This is exactly what we want in

our electricity system. Yet prices rose to levels last seen in early 2023, when we were

still coping with the aftermath of the most acute energy crisis in our history.

This disconnect between an energy transition that is highly successful, and electricity

prices which jump suddenly to extreme levels requires a political response. Left

unaddressed, it threatens our citizens and our competitiveness. It could undermine

support for our EU Green Deal.

In large part, the increase in prices in Greece reflected regional factors. Similar

increases were seen in Bulgaria, Romania, Hungary, Croatia, and other Member

States. This is a regional crisis.

A number of factors explain this shock: very warm weather, exacerbated by climate

change, outages of generation and cross-border capacity, and low rainfall during the

winter, which left reservoirs with less water for the summer season.

But our region has faced an additional burden: Russia’s attacks against the Ukrainian

grid have turned Ukraine into a significant net importer. This deficit is being met by EU

countries. This is another cost that Russia’s devastating war is imposing on our

economies.

At the same time, this shock has not impacted all Member States equally. The region

from the Czech Republic to Greece normally has similar electricity prices. In early

2024, the average monthly price among countries in this region varied by just a few

euros.

But this summer, the disparities in prices grew larger. Some hours the price varied by

over 100 €/MWh among neighbors. Often, the differences were much higher. At one

extreme point, the price of electricity in Hungary reached 940 G/MWh while in

neighboring Austria it was 61 €/MWh — a 15-time difference for the same product at

the same time across an internal EU border.

Over several weeks, these disparities add up. What used to be a difference of a few

euros became a difference of almost €100 during July. In August, the gap between

the most and least expensive EU member state in this region was €45. Multiplied by

the amount of electricity consumed, this is an unprecedented extra cost. And it

undermines the spirit and purpose of the internal market.

What is even more worrisome, the system is so complex and opaque that is virtually

impossible to understand precisely what is driving prices at any given point and time.

We have created an incomprehensible black box—even to experts. And we cannot

explain convincingly to our citizens why the price they pay is rising so suddenly. This

is politically unacceptable.

In light of these developments, we propose the following.

First, we need stronger governance. This episode underscores the need for more

coordination and planning at a regional level. It is especially important to ensure that

country-level decisions (e.g., a planned outage) are taken with a view towards

broader regional dynamics to avoid instances where such an event causes ripple

effects across a much wider space than anticipated. We need a system that allows

more EU input into country decisions.

Second, we need more EU regulatory oversight. When prices in one country are

shaped by events hundreds or even thousands of kilometers away, country-level

regulation is of limited use. No regulator has a remit to inspect actors across such a

wide geography to ensure that markets are functioning properly. This is a job that

must be taken up by the EU. We need an EU-wide regulator for electricity that can

look at multiple markets at once—and reassure consumers that there is no foul play.

Third, we need a special accommodation regarding Russia’s targeting of Ukrainian

infrastructure. Without sufficient electricity transfers within the EU, the impact of

electricity exports to Ukraine is only felt only by some countries. The new Electricity

Market Design offers some options to deal with a prolonged crisis that raises prices.

Greece will explore these options with the aim to claw back windfall profits from

producers and protect consumers during this shock.

And finally, we need a new push for electricity interconnectors. We must complete the

internal market. Localized congestion can affect a broad geography, making each

cross-border point a matter of general interest—a fact that should affect how we plan

and promote cross-border capacity. Moreover, when price disparities between

countries can reach such extreme levels, the cost-benefit proposition of

interconnections is much stronger. With these points in mind, the new Commission

should take up the task of pushing through more cross-border capacity.

The events of the past few months underscore something we have long known: that

the energy transition is a journey. It will require constant vigilance and adjustment. I

believe the ideas we have articulated here can help correct some of the weaknesses

in our market — and they are aligned with the clear message of the Draghi report that

we must strengthen the internal market for energy. It is imperative that we take up this

challenge. The success of the EU Green Deal depends upon it.

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