Short-term solutions are not enough. Industrialists want to lower energy bills through market reform

Industry faces high energy prices and is calling for a reform of the electricity market, particularly the decoupling of the electricity price from gas. The European Commission offers temporary aid through the Clean Industrial Deal instrument (CISAF), but it sees long-term change rather in the green transformation and strengthening of infrastructure.

Source: EURACTIV.sk

Energy-intensive industry in the European Union currently has electricity prices many times higher than its competitors in the USA or Asia. With increasing electrification, consumption is also growing rapidly. The International Energy Agency (IEA) expects that by 2035 the demand for electricity will increase by at least 40 percent. The European Commission, as well as the Slovak government, are so far offering subsidy schemes, but sustainable aid, according to experts, requires more comprehensive reforms. Industry is calling for a redesign of the market, better access to long-term contracts and for the use of renewable sources to be reflected in the final electricity price.

The problem with the market design

A significant source of the persistent problem of high prices is the so-called Marginal Pricing Model. Under this system, the price of electricity on the market is determined by the costs of the most expensive power plant needed to cover current demand. This is where natural gas comes into play. The Joint Research Centre (JRC) calculated that although gas-fired power plants cover less than a fifth of electricity production in the EU, they determine its price approximately 55 percent of the time.

This structural disadvantage is worsened by dependence on expensive imported fossil fuels. As a result of the Russian war against Ukraine, the EU shifted from cheap pipeline gas to more expensive LNG. The think-tank Bruegel calculated that as a result wholesale gas prices in the EU are on average five times higher than in the USA.

Electricity prices also vary considerably within the EU. „The commodity itself is more expensive in Slovakia than, for example, in Western Europe. The reason for this situation is Slovakia's strong interconnections with Hungary and further to the Balkans, where prices are consistently higher,” recalled Ján Mykhalchyk Hradický, an analyst at the Value for Money Unit.

Due to the market design and price formation, in the summer of 2025 Vladimír Soták, head of Železiarne Podbrezová, also came into conflict with the General Director of Slovenské elektrárne, Branislav Strýček. Soták reproached SE for selling cheap nuclear electricity at four times the cost, while Strýček labelled industry as „gamblers“ who irresponsibly buy on the spot market instead of long-term contracts.

Industry demands changes

Representatives of energy-intensive sectors speak of two solutions: structural reform and immediate compensation.

The first, long-term solution concerns price formation. It involves adjusting the functioning of the market and gradually decoupling the price of electricity from the price of gas. Michal Pintér, Director for Relations with the Government and the European Union from the Bratislava office of U. S. Steel Košice and the company's representative in the European steel association EUROFER, specified that the eastern Slovak plant will more than double its electricity consumption after electrification.

According to him, electricity producers should have an interest in retaining large industrial customers, just as industry needs stability of electricity production.

„Therefore, it would be necessary to consider alternative pricing models within the reform of the electricity market, since the era of (relatively) cheap gas is definitively behind us. Despite the growing share of renewable sources in total production, the final price is still determined by fossil fuels,“ he explained.

The price benefit of renewable sources should be reflected in the price for end consumers, including industry. In practice, the conclusion of long-term electricity purchase contracts, such as PPAs or Contract for Difference (long-term electricity purchase contracts, or a form of guaranteed price – ed. note), should also be more supported, not just talked about.

High energy prices seriously weaken competitiveness in other key Slovak companies as well. The Secretary General of the Association of Industrial Unions and Transport, Andrej Lasz, confirmed that lower prices are enjoyed not only by their competitors from third countries, but also within the Union, as a result of the burden of tariffs and fees on energy purchases in Slovakia. „High energy costs cause production to cease being economically sustainable at the prices the market accepts. The result is the limitation of production, the postponement of investments and, in some cases, the closure of operations,“ he warned.

Continuation of the article on EURACTIV.sk.

SOURCE: APZD