The Energy and Climate Ministers of the European Union reached an agreement this Tuesday in Luxembourg on the reform of the electricity market so that electricity prices depend less on the volatility of fossil fuels and which has garnered almost unanimous support from the Twenty-seven, with the sole exception of Hungary.
A new compromise proposal from the Spanish presidency has managed to unblock the castled and opposing positions of Paris and Berlin, with which the third vice president and acting minister for the Ecological Transition, Teresa Ribera, has achieved her ambition of closing an agreement on the session this Tuesday.
Ribera thanked the “almost unanimous” support for the proposal that has managed to unite the Member States in a response that will allow “better protecting European consumers, offering a signal to investors, facilitating price stability and reducing volatility.” .
Now that the Twenty-Seven have established their position, the Council is ready to begin negotiations with the European Parliament and agree on the final text of the reform, conversations that Ribera herself confirmed at a press conference will begin this Thursday.
Community sources have informed Europa Press that the proposal has allowed, on the one hand, contracts for difference for existing facilities in the case of investments to increase their capacity or repower them and, on the other, guarantee the Commission’s evaluation in accordance with state aid legislation and ensure against any distortion of competition.
These types of contracts are between an electricity generator and a public entity, normally the State, and stipulate that the seller will pay the buyer the difference in the price of energy from the moment of purchase to the signing of the contract, therefore which represents a limitation for the generator, which receives stable income for the electricity it produces, which reduces price volatility.
The Twenty-seven have agreed that these two-way contracts for difference will be the mandatory model used when it comes to public financing in long-term contracts and will apply to investments in new energy generation facilities based on wind energy, solar energy, geothermal energy, hydroelectric energy and nuclear energy, which would provide “predictability and certainty.”
The rules for contracts for difference would only apply after a transitional period of three years – five years for offshore hybrid asset projects connected to two or more bidding zones – after the entry into force of the regulation, in order to maintain legal certainty for ongoing projects.
At the same time, revenues from these contracts would be redistributed to end customers and could also be used to finance the costs of direct price support systems or investments aimed at reducing electricity costs for end customers.
This means that “all asset price support regimes, whether new or existing, will have to adhere to a clear design”, explained the European Commissioner for Energy, Kadri Simson, who welcomed the agreement on a reform that will make the market “more predictable” for the electricity sector and, consequently, offer “greater benefits” and open space for clean technologies. “It’s a big step forward and it works for the Twenty-Seven,” she added.
The proposal is part of a broader reform of the design of the EU electricity market, which also includes a regulation focused on improving protection against market manipulation through better supervision and transparency (REMIT), which the Twenty-seven agreed in June.
