After nine months of negotiations, the European Union’s co-legislators managed to reach agreement on the reform of the European electricity market, on Thursday 14 December, in the margins of the plenary session in Strasbourg, at around four o’clock in the morning. The Spanish Minister for Ecological Transition, Teresa Ribera, welcomed this agreement, reached under the Spanish Presidency of the EU Council.
“We will be able to stabilise long-term markets, speed up the deployment of renewable and fossil-free energy sources, offer more affordable electricity to the EU’s citizens and enhance industrial competitiveness”, she said.
The agreement effectively supports the EU’s target of a 45% share of renewable energy by 2030 (see EUROPE 13153/1), including through new renewable energy auctions at EU level linked to the European Renewable Energy Financing Mechanism.
CfDs
An important point of debate concerned the system of two-way Contracts for Difference (CfDs), presented as a “standard form” of public support for investment in decarbonised electricity production (renewable or nuclear).
The Member States had negotiated at length to reach a political agreement (‘general approach’) on this point (see EUROPE 13273/2) and were concerned that the “delicate balance” struck would be undermined by negotiations with Parliament.
In the end, the EU Council’s position was retained, allowing CfDs to be extended to existing nuclear power plants, subject to the inclusion of the use of “mechanisms equivalent” to CfDs, as proposed by Parliament. These mechanisms would have the “same effect” as CfDs, but would operate differently.
“The idea is to support major investments, for example in offshore wind power, which sometimes require other instruments. The CfDs may not be sufficient”, explained Parliament’s rapporteur, Nicolás González Casares (S&D, Spanish), to a handful of journalists.
Member States are encouraged to pass on surplus revenue from these CfDs to consumers, either directly or by financing the costs of price support or investments aimed at reducing electricity costs.
PPAs
The European Parliament’s rapporteur also welcomed the result achieved on Power Purchase Agreements(PPAs).
Through public funding, Member States will be able to support the purchase of new renewable generation exclusively, where conditions allow and in line with Member States’ decarbonisation plans. In addition, the voluntary nature of voluntary standardised contracts will be maintained.
The agreement also provides for the European Agency for the Cooperation of Energy Regulators (ACER) to assess the market for PPAs on the basis of information from the database provided for in the REMIT regulation, which was also recently the subject of an interinstitutional agreement (see EUROPE 13294/5).
Capacity remuneration mechanisms
In the end, Parliament gave in to the derogation concerning the limit on CO2 emissions in order to benefit from remuneration via capacity mechanisms, which countries such as Poland want to benefit from for their coal-fired power stations. This derogation will be possible until 2028 and is subject to a case-by-case assessment by the Commission.
“It’s clear that we had to accept something we didn’t like in order to reach a solution”, Mr Casares conceded.
Michael Bloss (Greens/EFA, German), the shadow rapporteur, condemned the decision: “One day after the historic agreement at the Dubai climate conference, the EU is deciding on new fossil fuel subsidies for the most polluting coal-fired power stations. Europe is therefore not credible.
Electricity price crisis and consumer protection
In addition, there is no cap on the income of inframarginal generators in times of crisis. And it will be up to the EU Council to determine whether there is a crisis in electricity prices, on the basis of a proposal from the European Commission.
The criteria for declaring a crisis are defined according to the average wholesale price of electricity (above €180/MWh, regardless of inflation) or linked to a sharp rise in retail electricity prices.
The co-legislators also agreed on the existing possibility of further reducing electricity prices for vulnerable and disadvantaged customers, taking into account provisions to avoid market distortions.
These vulnerable customers will also be better protected against the threat of grid disconnection and specific provisions will allow consumers, including businesses and public authorities, to participate in energy sharing. (Original version in French by Pauline Denys)