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Confronted with sustained high electricity prices, some Member States demand a deep reform of electricity markets in the EU. Conversely, other Member States ask to strictly respect the current market framework. In this paper, we review what the key EU institutions have publicly stated and what they are apparently considering, and we describe fhe concrete measures introduced or considered fo dafe. Then, we assess these measures. We close by prescribing first-best measures and proposing an alternative in case first-best measures are deemed insufficient, politically infeasible and/or economically unsustainable.

For several months, electricity prices in the European Union (EU) have been at sustained and unprecedentedly high levels. The current energy crisis is first and foremost a natural gas crisis. However, as reference day-ahead electricity markets reflect the system marginal (opportunity) cost of generation …