The extreme price moves observed in energy markets in recent weeks are a symptom of supply shortages, not an issue with market functioning, said Peter Reitz, the chief executive officer of the European Energy Exchange, during a conference on sustainability sponsored by EEX in London on 8 September.
“We have a supply crisis. We don't have a market design crisis. We are explaining this to all of the political stakeholders at the moment that the prices that we are seeing reflect a fundamental situation of supply and demand where you have a supply shortage and an inflexible demand curve,” Reitz said.
His comments come as the European Commission is working on an emergency intervention in the electricity market to limit soaring power prices. EEX is one of the largest energy exchanges in Europe and offers both spot and futures trading in electricity, natural gas, and emission allowances.
“The EU ETS [Emissions Trading System] is a good example of this,” said Reitz. “You have voices these days calling for the suspension of the market for a number of years, or stopping it altogether. I think this would be a completely wrong signal,” he said.
“EEX is the ETS auctioning platform for all the EU states. We have collected just in the first seven months of this year more than 24 billion euros for these governments. Rather than stopping that mechanism, let's think about how to best allocate that money, change the current supply crisis, and support more renewable energy.”
He added that further development of renewable energy sources is the way forward to help avoid severe volatility in European power markets in the future.
“[The current high prices] are sending investment signals to those looking to go for additional capacity. The cheapest and the quickest way to build additional capacity nowadays is renewables in almost every part of the world," he said.
“Decarbonisation of the energy industry [will help alleviate] both crises that we are facing at the moment: renewable energy is the solution to the climate change crisis, and it is also the solution to the current supply crisis, which is facilitated to a large extent by a shortage of gas in Europe.”
He added, “If we look back at this situation today in five years or 10 years, this may actually be the accelerator of the energy transition, and the current focus on energy independence in Europe can also be facilitated by this, because nobody can create a shortage of wind or sun as we're seeing being created on gas these days. Decarbonisation of energy is now more important than ever.”
Recordings of all sessions at the EEX sustainability conference are available on EEX's webpage.