Europe is getting more of its power from renewable sources every year but, as the current crisis has shown, power markets remain at the mercy of increasingly volatile gas prices. The EU Commission has recently proposed a plan to relieve the crisis by decoupling electricity and gas prices. But the plan must strike a balance between addressing skyrocketing prices and protecting the cross-border power market the EU has been rolling out across its member states since the 1990s.
A key feature of liberalised power markets is marginal cost pricing. Gas-fired power is often the most expensive source of electricity, and if this kind of plant is required to balance supply and demand it becomes what’s called the marginal plant, which effectively sets the price for the entire power market.
