A Perfect Storm Triggering Light-Touch Reform? The Energy Crisis and EU Electricity Market Regulation

In 2022, Europe faced an energy crisis marked by a drastic reduction in Russian gas supply, exacerbated by the global surge in energy demand from China's economic reopening post-COVID-19. Concurrently, delayed nuclear plant maintenance in France and a severe drought affecting several countries further diminished energy production. Russia strategically wielded its gas supply to undermine European support for Ukraine, raising concerns about energy security for the upcoming winter. The supply shortage and market uncertainty triggered a surge in energy costs, causing a ripple effect on electricity prices. Faced with this turmoil, politicians across Europe urged reform in the electricity market, also echoed in the sentiment expressed by Commission President von der Leyen in 2022 that the market was no longer working. Beyond the immediate response through temporary crisis legislation in 2022, the EU in 2023 proposed a comprehensive reform of its electricity market regulation, formally adopted in 2024 as the electricity market design (EMD) reform. Although fundamental elements of the electricity market design were called into question, the paradigm was successfully defended. The perfect storm largely resulted in light-touch reform, but introduced changes related to the energy transition agenda. This paper examines the nature of policy changes of EU electricity market regulation triggered by the energy crisis, and how this was affected by the evolving crisis-perception over time. Crises often serve as catalysts for policy change, yet the likelihood and scope of such change depend on how crises are perceived and framed. Crisis exploitation theory (Boin et al., 2009) highlights the role of framing in shaping reform agendas, particularly in polycrisis contexts where multiple crises interact. Beyond how a crisis is perceived, it also matters how the causes of a crisis are portrayed. Identification of the factors behind a crisis may already indicate the degree to which existing office-holders or existing policies are to blame erupted (Boin et al., 2009). The understanding of a crisis and its causes, as well as how to respond, may also be affected temporal factors such as the relative timing of a crisis response vis-à-vis other political processes or events. While the literature has examined the extent of policy change triggered by a crisis, less attention has been given to how one crisis may be used to introduce measures for tackling another crisis. While scholars have shown that crises may be exploited as windows of opportunity that policy entrepreneurs can use to introduce changes that they favoured also before a crisis erupted (Boin et al., 2009), specific attention is needed to how a fast-burning crisis may be exploited to address a slow-burning one and how more fundamental policy change may be avoided by re-focusing attention on other reform needs. This paper examines how the EU electricity market reform was triggered by the energy crisis, which defenders of the status quo used to pivot from reform calls growing in step with crisis urgency to introduce policy changes addressing the climate crisis.