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EU chief plans restructuring of electricity market as prices skyrocket

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European Commission President, Ursula von der Leyen, revealed plans for structural reforms to skyrocketing energy on Monday, saying prices have exposed the limits of the European Union’s electricity market design.

Von der Leyen stated in her speech, at an international conference in Bled, Slovenia that the market “was developed under completely different circumstances.”

“That’s why we, the commission, are now working on an emergency intervention and a structural reform of the electricity market,” she said.

The European Union has struggled with hikes in energy prices in the last six months in the wake of the Russian invasion of Ukraine.

EU energy ministers have planned an emergency meeting for Sept. 9.

Electricity prices in the European market are set by the most expensive energy source needed in production, currently gas-fired power plants, as against the circumstances of the Ukraine war, wholesale gas prices spiked, resulting in more expensive electricity.

A modification of the European electricity market could review this so-called merit order mechanism and allow consumers pay less for cheaper electricity generated with solar and wind energy.

Robert Habeck, German Economy Minister, also recently announced market reforms to separate customer prices for electricity from the rising cost of gas.

Praising the EU efforts to end a chronic overdependence on Russian fossil fuels, Von der Leyen cautioned against developing a new reliance on China for strategic raw materials like Lithium for batteries.

“Out of the 30 critical raw materials today, 10 are mostly sourced from China. So we have to avoid falling into the same dependency as with oil and gas,” Von der Leyen said.

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