Why Spanish-Portuguese proposal to intervene in wholesale energy markets is problematic

 
Spain and Portugal want to push ahead with a benchmark price for energy, but this could lead to increased consumption of fossil gas, inflated gas prices and fewer incentives to invest in renewable energy, warns Lion Hirth and Christoph Maurer.

Lion Hirth is an assistant professor for energy policy at Hertie School in Berlin and director of the consulting firm Neon Neue Energieökonomik. Christoph Maurer is the director of the consulting firm Consentec.

The Spanish and Portuguese governments have proposed a “production cost mechanism” to reduce wholesale electricity prices.

After no consensus could be reached in the 24-25 March European Council to implement the intervention across the EU, the two governments chose to proceed with the instrument unilaterally. It has already been notified to the European Commission.

However, the proposal is quite problematic, causing several adverse effects. (...)