Alternatives to the merit order principle
5.8.2022
Priority question for written answer P-002787/2022
to the Commission
Rule 138
Lukas Mandl (PPE)
The merit order principle, which is used to determine the price of electricity, is based on the marginal costs of power plants for each megawatt hour generated. According to this principle, electricity from power plants producing the cheapest electricity is the first to be fed into the grid, followed by electricity from other power plants in ascending order of marginal costs. This means that the electricity from the last power plant to be fed into the grid, i.e. the most expensive one, is decisive for determining the price of electricity. Since, currently, these are gas-fired power plants, high gas prices directly lead to an increase in the price of electricity, with the additional costs being borne by consumers. This principle results in a large difference between the actual costs of producing electricity from renewable energy sources and the price of electricity billed, especially in countries with a high level of electricity production from cheaper renewable energy sources. This disproportionality is a major problem for consumers and further drives inflation.
- 1.Is the Commission aware that gas and electricity prices are directly related and lead to a further increase in inflation?
- 2.What alternatives to the merit order principle does the Commission consider effective to tie the price of electricity to the actual cost of electricity production?
- 3.What further measures will the Commission take to address the disproportionately high electricity prices?