Reform of the European electricity market, the difficulties of the EU Council
(sustainabilityenvironment.com) – When the gas crisis hit electricity prices in 2022, it was clear to almost everyone in the Old Continent that the European electricity market needed reform. A change in some key mechanisms to protect consumers and industry from future shocks. That is why, with many difficulties, the European Commission presented a proposal in March 2023 to amend the rules on the structure of the market and one on the REMIT regulation.
However, it is not an easy task to get to grips with a system so complex and deeply linked to the various national differences. And the first contrasts between the 27 are not long in coming. According to Reuters‘ exclusive report, the EU countries are considering the possibility of eliminating a central part of the European electricity market reforms, due to tensions between France and Germany. The problem? The chapter on CfDs (contracts for difference), is a form of public support through which the energy producer is guaranteed by the Government a minimum price for electricity.
Contracts for difference, the bone of contention
The two-way mechanism proposed by the von der Leyen Commission also provides for the fixing of a maximum price, so that any revenues generated by higher prices are returned to the State. And then be employed to lower consumer bills. A measure which, according to the Commission’s draft, should only concern photovoltaic, wind, geothermal, and hydroelectric plants. But France, which continues to press the nuclear issue – as we saw during the discussion of the RED III Renewable Energy Directive – would like to extend the CfD contracts to its nuclear park. And use any revenue generated by price overruns to finance the restructuring of older reactors.
A position supported by some Eastern European countries and clearly rejected by Germany, originally also opposed to the change in the electricity market. Berlin is not alone in its opposition but the clash between the parties has led to a seemingly unsolvable stalemate. And while the European Parliament’s Industry Committee has approved its position on the reform text, the EU Council could remount a whole part of the original proposal.
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The draft compromise
Reuters was able to consult the draft compromise drawn up by Spain – which holds the Presidency of the Council until the end of the year – on this issue. The text asked the Twenty-seven to consider three options, including the complete removal of rules on such incentives. The other two options would in one case limit the way in which Member States can use the revenue collected through CfDs and in the other allow Brussels to intervene in the national use of these revenues, where their use distorts the Community single market.
“It is the first time – write Kate Abnett and Julia Payne – that countries consider simply abolishing the rules, after struggling to find a compromise. Failure to approve this part of the reform would not prevent France and other countries from offering fixed-price electricity contracts to producers“. In any event, this could make it more difficult to use such revenue by making it subject to approval by the European Commission under EU State aid rules.