On Friday 26 May, the Swedish Presidency of the Council of the EU presented a document seeking the views of Member States on the reform of the electricity market presented by the European Commission on 14 March (see EUROPE 13141/1).
While the Swedish Presidency has indicated that the work of the Energy Working Party has progressed rapidly and a number of issues have already been resolved at a technical level, more political issues still need to be addressed by the Member States’ representatives to the EU.
CfDs
The Presidency returns to two-way contracts for difference (CfDs), which “are at the core of the electricity market design proposal”.
Some Member States support the Commission’s proposal, but others are asking for more flexibility on CfDs especially in terms of their bindingness (with regard to limiting the types of direct price support schemes) and the redistribution of revenues.
The Swedish Presidency has therefore made three proposals to the Member States.
The first is to have a longer transitional period or application at tenders rather than contracts to accommodate the projects that are currently in the pipeline in Member States, no additional clarifications on the concept of ‘direct price support schemes’ and no earmarking of revenues for consumers, but where revenues are redistributed to undertakings there are clear rules for such redistribution.
The second calls for the inclusion of a clear definition of the concept of ‘direct price support scheme’. Lastly, it maintains the general rule that all revenues should be earmarked for consumers (undertakings and households) and more specific rules for redistributing revenues to undertakings must be laid down.
Finally, the third option includes no transition period (or a short one), a clear definition of ‘direct price support scheme’ and keeping the general rule that revenues should be earmarked for consumers as presented in option 2. In addition, Member States have the option of using part of the revenue to finance the costs of CfDs.
Energy crisis
The Presidency also sets out the conditions under which a price crisis must be declared and how long it is valid. To do this, it is once again proposing three options.
The first indicates that the decision to declare a price crisis is made in accordance with the criteria of the current revision (REV3) and may be valid for a period of up to 6 months. The Commission must then assess if the triggering conditions are expected to hold after the validity of the decision expires and, if applicable, propose a new decision on prolongation to the EU Council.
In addition, Member States may only intervene at prices below cost in bidding zones where wholesale prices have reached certain specific criteria.
The second option includes the same elements as the first, except that Member States intervene at prices below cost and the crisis period is extended to 12 months, in line with the Commission’s proposal.
In option 3, the criterion of the “expected duration of the crisis” on the wholesale and retail markets is reduced to 3 months, but the decision to declare a regional or EU-wide price crisis may also be valid for a period of up to 12 months.
Capacity mechanisms
Finally, the Presidency is asking Member States for their views on three proposals concerning the relaxation of procedures relating to capacity mechanisms (remuneration of capacity made available by suppliers in addition to the revenue received for the energy supplied), given that several countries have requested that the adequacy process be addressed and that the approval process be simplified and implemented more quickly.
The first option includes a review clause in the capacity mechanism application process so that the Commission can ask ACER (Agency for the Cooperation of Energy Regulators) to modify the capacity mechanism methodology. In addition, it may submit a report assessing further possibilities for streamlining procedures within the current capacity mechanism framework and, if necessary, make proposals to simplify the process for assessing capacity mechanisms by the end of 2024 at the latest.
The second option aims to set an explicit additional deadline for the submission of the European resource adequacy assessment (ERAA) proposal and to specify that ACER and the national regulatory authorities are competent to impose the submission of the ERAA within the time limit.
The third option aims to remove the additional requirements for non-fossil flexibility support schemes for Member States with existing capacity mechanisms.
To see the EU Council Presidency document: https://aeur.eu/f/74h
To look at the Commission’s proposal: https://aeur.eu/f/5rp (Original version in French by Pauline Denys)