In 2021 and 2022 extraordinarily high prices have been observed in electricity markets across Europe. The main reason behind the high electricity prices is the high price of natural gas, which is used to generate electricity. Natural gas-fired power plants are often needed to satisfy the demand for electricity when the demand is at its highest or when the volumes of electricity generated from other technologies such as nuclear, hydro, or variable renewable energy sources do not suffice to cover demand. Hence, natural gas is often said to be the price-setting technology in the European electricity system. Demand for natural gas and electricity increased as economies opened up after the pandemic lockdowns but also due to the 2022 high summer temperatures and the resulting increased cooling demand in parts of Europe. At the same time electricity generation from certain technologies, e.g., nuclear, has been below historical levels due to technical and weather-dependent circumstances. The Russian invasion of Ukraine added a supply shock that further exacerbated the constraints and pushed prices up.
Possible Design Elements of Consumer Support Schemes
The very high prices that have been observed in electricity markets since September 2021 and exacerbated by the Russian invasion of Ukraine have sparked the adoption of different types of support schemes across Europe. This brief fact sheet describes possible design elements to consider for support schemes aimed at final electricity customers. The fact sheet is purely descriptive and not prescriptive.