In a new EU Council document published on 29 September, the Spanish Presidency is attempting to break the deadlock in negotiations on electricity market reform with a view to reaching a political agreement in principle (‘general approach’) during the ‘Energy’ Council meeting in Luxembourg on Tuesday 17 October. It is therefore proposing three different options, one of which is to delete the controversial Article 19b governing Contracts for Differences or CfDs (as voluntary direct price support schemes for new investment in electricity generation).
While a general approach was reached on the ‘REMIT’ part at the ‘Energy’ Council of 19 June (see EUROPE 13204/1), the part on electricity market design (EMD) still divides Member States, notably on the issue of State aid in the form of Contracts for Differences (CfDs) for extending the lifetime of existing production units, including nuclear power plants, but also on a possible derogation for CO2 emission limits when applying capacity mechanisms.
National delegations had until 1 September to submit their written proposals concerning Article 19b.
Taking these contributions into account, the Spanish Presidency has proposed three new options based on the latest revision proposal discussed on 19 June (REV5).
Limit on CfD income to be distributed to companies
The first option is to strengthen the paragraph on the design criteria for CfDs (to avoid distorting effects on competitiveness and trade, for example) and to add a new paragraph on new investments in electricity generation to extend lifetime for which the remuneration is not determined by a call for tenders procedure.
In these cases, CfDs must either apply a ratio to the electricity produced within a CfD (proportionality) calculated on the basis of the amount of investment, or apply a limit to the income from CfDs that must be distributed to companies.
Finally, a new paragraph has also been added to strengthen the monitoring and transparency provisions relating to the application of article 19b. In particular, the Commission must issue recommendations to remedy distortions in the conditions of competition in the internal market.
The distribution of income from CfDs remains unchanged from the last proposal.
Traceability of financial flows for CfD income distributed to companies
The second option also reinforces the paragraph on CfD design criteria.
With regard to the paragraph on CfD design criteria for new life extension investments in electricity generation for which the remuneration is not determined by a call for tenders procedure, one of the following two conditions must be met.
Either a ratio must be applied to the electricity produced under a CfD calculated on the basis of the amount of investment, as in the first option, or the revenue from CfDs must be distributed to companies in accordance with the general rules of Article 19, in a way that allows the traceability of the corresponding financial flows.
This second option also adds a new paragraph that strengthens the monitoring and transparency provisions for Member States and the Commission, including a provision for the Commission to impose, by means of an implementing act, a limit on the share of revenues accruing to business end-customers.
Deletion of article 19b
Finally, the EU Council document presents a third option, which is simply to delete Article 19b in its entirety from the text.
Negotiations will now continue at the level of the ambassadors of the EU Member States (Coreper) with a view to preparing a new compromise text (REV 6) in an attempt to reach a political agreement at ministerial level on 17 October. (Original version in French by Pauline Denys)