Spain sent a non-paper to EU Member States ahead of the meeting of energy ministers on Tuesday 26 October, detailing its proposals to tackle rising energy prices at EU level. These include decoupling electricity market prices and setting a maximum price for fossil gas.
“A common European approach is our preference for the whole European energy internal market. [...] However, in absence of such European response, the Commission could provide Member States flexibilities to adopt measures in that sense in extraordinary situations”, underlines the Spanish document obtained by EUROPE.
For Madrid, Member States should be allowed to adapt the formation of electricity prices to their specific situations (mix, resources, level of interconnection) in exceptional situations, such as the one the EU is currently experiencing.
However, Spain has no intention of leaving the EU’s common electricity price policy. This is a European approach, a source told us.
Pointing out that soaring fossil gas prices have had a “contagion effect” making electricity prices “unjustifiably more expensive”, the Spanish government recommends decoupling electricity prices from gas prices.
“Instead of the pure marginal price signal (contaminated by the spikes in gas prices), the electricity price would be obtained as an average price with reference as well to the cost of ‘inframarginal’ clean technologies (particularly renewables)”, the paper details.
Under the current system, the last power plant needed to meet consumer demand sets the overall price for all electricity producers on the wholesale market. However, at times of peak demand, this is often a gas or coal-fired power station.
Madrid believes that its proposal would directly link electricity prices to national generation mixes, while protecting consumers from excessive volatility.
Spain also proposes that a ceiling be set on the price of electricity generated by fossil gas (with compensation to be recovered later). It also calls for the establishment of a centralised European platform for the purchase of fossil gas to facilitate the building of strategic gas reserves, as well as measures to prevent financial speculation in the EU Emissions Trading System (ETS).
See the Spanish document: https://bit.ly/3mmcOlT (Original version in French by Damien Genicot)