The president of the European Commission received today the letter from the Greek Prime Minister, Kyriakos Mitsotakis, through which a European solution is requested to the distortions of the energy market that lead to large discrepancies in the price of electricity between EU countries. This was confirmed today by the press representative of the European Commission Committee, Eric Mamer.

“We will analyze the letter we just received”said the representative responsible for Energy issues, Tim McPhee, clarifying that the Commission’s response will come “in due course”.

Asked to comment, in today’s Commission briefing to the press, on the Greek Prime Minister’s note in his letter that Russian strikes in Ukraine have led to a spike in prices, Mr. McPhee replied that Russian attacks on Ukraine’s energy infrastructure and Russia’s “instrumentation” of energy is an issue that the Commission is trying to address in various ways. One of them, the spokesman said, is to help Ukraine restore its electricity system, but also to export energy to Kiev. He, however, did not want to go into details about what the effects are in each EU member state and region. He said only that the Commission is “monitoring the situation very closely” and “remains in contact with all member states to address this issue”.

Concluding, he recalled that the European Commission has taken many extraordinary and structural measures in the last two years to regain control of the energy markets. “Prices now are more stable than they were at the height of the crisis in 2022, but we know we still have work ahead of us,” he stressed. Finally, he noted that the President of the Commission has underlined how important it is to deal with high energy prices in high-level political directions, recently discussed in the context of the Draghi report and in the Commission’s report on the energy situation of the Union. “It’s something we’re watching very closely and we’ll move forward with our analysis,” he stressed.

The Mitsotakis letter in detail:

Dear Ursula,

I am writing to you regarding the issue of electricity prices. In the space of a few months, wholesale electricity prices in Greece have more than doubled, from 60 euros/MWh in April to 130 euros/MWh in August.

This increase occurred despite our remarkable progress in accelerating the energy transition. Compared to last summer, our wind and solar power generation increased by 25%, while lignite generation decreased by 27%. This is exactly what we want for our electrical system. However, prices rose to levels last seen in early 2023, when we were still dealing with the consequences of the most acute energy crisis in our history. This mismatch between an energy transition that is highly successful and electricity prices that suddenly rise to extreme levels requires a policy response. If left unaddressed, it threatens citizens and our competitiveness. It could undermine support for the EU Green Deal.

To a large extent, the increase in prices in Greece reflected regional factors. Similar increases were observed in Bulgaria, Romania, Hungary, Croatia and other Member States. This is a regional crisis. Many factors explain this shock: very high temperatures, exacerbated by climate change, disruptions in power generation and cross-border transport capabilities, and low rainfall during the winter, which left reservoirs with less water for the summer period. But our region has faced an additional burden: Russia’s attacks on the Ukrainian network have turned Ukraine into a major net importer. This deficit is covered by the EU countries. This is another price that Russia’s destructive war imposes on our economies. At the same time, this shock did not affect all Member States equally. The area stretching from the Czech Republic to Greece usually has similar electricity prices. At the beginning of 2024, the differences in the average monthly price between countries in this region amounted to only a few euros.

However, this summer the discrepancies widened. At certain times, the price difference between neighboring countries exceeded 100 euros/MWh. Often, the differences were much greater. At one extreme, the price of electricity in Hungary reached 940 euros/MWh, while in neighboring Austria it was 61 euros/MWh, that is, 15 times higher, for the same product, at the same time, inside the EU.

Over the course of several weeks, these differences add up. The difference of a few euros became a difference of almost 100 euros during July.

In August, the difference between the most expensive and the cheapest EU member state in this region was €45. If multiplied by the amount of electricity consumed, this is an unprecedented additional cost. And it undermines the spirit and purpose of the internal market. Even more troubling is that the system is so complex and opaque that it is almost impossible to understand exactly what is affecting prices at any given moment. We have created an incomprehensible “black box”, even for experts. And we cannot convincingly explain to our citizens why the price they pay is rising so suddenly. This is, on a political level, unacceptable.

In light of these developments, we propose the following. First, we need stronger governance. This episode highlights the need for more coordination and planning at the regional level. It is particularly important to ensure that country-level decisions (eg a planned shutdown) are made with broader regional dynamics in mind, to avoid situations where such an event causes ripple effects much wider than expected. We need a system that allows greater EU input into a country’s decisions. Second, we need greater regulatory oversight from the EU. When prices in one country are shaped by events hundreds or even thousands of kilometers away, country-level regulation is of limited utility. No regulatory authority has the authority to inspect operators over such a large geographical area to ensure markets are functioning properly. This is a job for the EU to do. We need an EU-wide electricity regulator that can look at multiple markets at the same time and reassure consumers that there are no unfair practices. Third, we need a special arrangement regarding Russian targeting of Ukrainian infrastructure. Without sufficient electricity transfers within the EU, the impact of electricity exports to Ukraine is only felt in some countries. The new electricity market design offers some options to deal with a protracted crisis that is driving up prices. Greece will explore these options with the aim of recovering skyrocketing profits from producers and protecting consumers during this shock. And finally, we need new impetus for electrical interconnections. We must complete the internal market. Local congestion can affect a wide area, making each cross-border point a matter of wider interest. This should influence how we design and promote cross-border capabilities. Moreover, when price differences between countries can reach such extreme levels, the cost-benefit ratio of interconnections becomes even better. Taking these comments into account, the new Commission should take on the task of promoting more cross-border capacity.

The events of the last few months underscore something we’ve known for a long time: that the energy transition is a journey. It requires constant vigilance and adaptation. I believe that the ideas we have put forward here can help correct some of our market weaknesses – and they are in line with the clear message of the Draghi report, that we need to strengthen the internal energy market. It is imperative that we take up this challenge. The success of the EU Green Deal depends on it.

Sincerely, Kyriakos Mitsotakis