Economic and Legal Aspects of the  Implementation of the MARKET STABILITY RESERVE

Economic and Legal Aspects of the Implementation of the MARKET STABILITY RESERVE

CEEP Member's Position Paper The Polish Electricity Association, a Central Europe Energy Partners member, is of the opinion that the Market Stability Reserve will have significant economic consequences and faces serious legal question marks. Economic aspects Higher carbon prices due to the enforcement of the MSR will drive electricity prices up. High CO2 prices are not necessary to drive low-carbon investment. The carbon price by 2030 in a scenario with the MSR is estimated at 55 EUR/t versus ca. 35 EUR/t without the MSR – over 60% increase. Although the MSR proposal is volume-based, it is clear that its main objective is to increase carbon prices in order to stimulate investment in low-carbon technologies. However, such investments are already taking place today in Europe without high carbon prices. In 2012, there were over 20 GW of renewable capacity installed despite a fairly low carbon price due to support schemes. Higher energy prices for industry and households. The adoption of the MSR, therefore, will decrease competitiveness of European industry and income for households by increasing electricity prices, without further benefiting low-carbon development, which is taking place anyway through other instruments. This price increase will be most significant in MS with higher carbon intensity of power generation – Poland, Germany, Czech Republic, Bulgaria, Romania, Greece, Estonia. MSR’s main effect will be an increase of natural gas imports to Europe as it will mainly render gas-fired power plants more profitable than coal-fired installations fuelled mostly by domestic resources. We estimate that this increase by 2030 will be approximately 200 billion cubic meters – equivalent to 2 years of natural gas consumption for [...]