The European Electricity Market: How Does It Work?

Interview with Céleste Grillet, Igor Arduin, Louise Badoche

In 2022, the European electricity market faced an unprecedented crisis, marked by soaring prices, record revenues for some players, and a struggling nuclear power generation fleet in France. These conditions are directly affecting consumers’ bills, a trend that is expected to continue for the foreseeable future if the situation does not change.

On March 14, 2023, the European Commission presented a proposal to reform the European electricity market in order to respond quickly to the need to protect end consumers, strengthen the competitiveness of European industry, and accelerate the development of renewable energy.

With Céleste Grillet and Igor Arduin, a Consultant and Senior Consultant, respectively, at Carbone 4, in this episode we discussed how the European electricity market works, reviewed the various contextual factors to clearly identify the causes of the crisis in the electricity markets, and reiterated the importance and necessity of reducing our energy consumption.

Erratum: At 14:50 and 14:54, the term "full cost" is used, when in fact we are referring to "marginal cost"; we apologize for this confusion.

To learn more about this topic:

• Educational and Technical Note on Electricity Market Reform, Carbone 4: https://www.carbone4.com/publication-note-reforme-marche-electrcitite
• The European Market: A Guide, RTE: https://www.rte-france.com/acteur-majeur-europe-electricite/marche-europeen-mode-demploi
• European Electricity Market: “We Need Reform to Stimulate Investment in Low-Carbon Technologies and Ensure Supply,” Le Monde: https://www.lemonde.fr/economie/article/2023/01/07/European-Electricity-Market-Reform-Is-Needed-to-Stimulate-Investment-in-Low-Carbon-Technologies-and-Ensure-Supply_6156956_3234.html#:~:text=How%20does%20this%20market%20work%20%3F,the%20lowest-cost%20production%20method
• Energy Crisis: Brussels Proposes New Rules to Stabilize Electricity Prices in Europe, Franceinfo: https://www.francetvinfo.fr/economie/energie/marche-europeen-de-l-electricite-bruxelles-propose-de-nouvelles-regles-pour-stabiliser-les-prix-sur-le-continent_5711459.html
• Consuming Less Energy: The Best Way to Break Free from Russian Oil and Gas in Record Time, Carbone 4: https://www.carbone4.com/article-russie-sobriete

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Music: César Dugast

Voice: Louise Badoche

Graphic Design: Kevyn Bargue