The 27 EU governments have finally managed this Tuesday to agree on their position on how to reform the European electricity market after it was assured to all that the new way of setting electricity prices will not mean that electricity will be more cheaper in some countries than in others, thus affecting the competitiveness of national companies and industries. This is the concern that, months after starting the negotiation, many delegations continued to express and that is at the basis of the most bitter confrontation between France and Germany.. Until the last moment, Paris has defended that the boost to renewables contemplated by the reform should not leave behind nuclear generation, its main source of electricity generation, and Berlin has defended that public aid to nuclear power plants should not lower the price of electricity in to a greater extent than in countries with a more determined push for renewables, as is your case.
The agreement has been reached based on a latest proposal drawn up by the Spanish Presidency of the Energy Council after listening to all the ministers separately again.. Modifies some points to make it clear that the public aid scheme applies to “all” public electricity auctions – of wind, solar, geothermal, hydroelectric and also nuclear origin, all “clean” – and that in the event that there are benefits because the auction price is lower than the market price, its redistribution “will not create distortions on competition and trade in the internal market” of the EU.
If there are suspicions that aid for electricity generation or the redistribution of profits may distort competition between EU countries, the Commission will be the one to study these state auctions in light of the EU state aid rules. , summarized the third vice president, Teresa Ribera, before asking the ministers to make a final assessment of the compromise proposal to give the approval that was finally produced, with the only vote against being Hungary.
Shortly after closing the agreement, Ribera has shown his “satisfaction” with a pact between EU governments to configure a new electricity market that, he said, “will better protect European consumers, offer signals to investors in energy, will facilitate greater price stability and less dependence on the volatility of raw materials or the daily market”. The agreement will also benefit shared energy schemes, by recognizing the right to share energy that “will facilitate investing in self-consumption” and “protect against future price crises.”
Ribera had been “optimistic” about reaching an agreement before a meeting began that required two more alternative texts to have the green light.. Inside, before the ministers, the vice president had warned the Energy Ministers that “we will stay here as long as necessary.”. The translation services are contracted and insured until late at night but I would like you all to go home for dinner.”. Also, right from the start, the differences have once again become evident, between Paris and Berlin and also between other countries aligned with one or the other.. What France and Germany have agreed on is rejecting Ribera's penultimate proposal – improved last Friday, after a meeting of the ambassadors of the Twenty-Seven in Brussels -. The German minister, Robert Habeck, has been especially harsh with the third vice president, who a few weeks ago tried to unblock the agreement by directly eliminating the points that caused the rejection of Germany and France.. “What has been provided is disappointing, the Presidency tries to solve the problem by ignoring it, but ignoring the problem is not solving it,” he said.
After listening to all his colleagues, Ribera adjourned the morning session to meet separately first with Habeck and the French minister, Agnès Pannier-Runacher, and then with the rest of the ministers. In the middle of the afternoon and as a result of these bilateral conversations, another text was presented with some clarifications, additions and modifications regarding the aid scheme for electricity generation and guarantees on competition in the EU, which finally obtained the support of the 26th of the 27 member states.
Aid for renewables and nuclear
Except for Hungary, the EU governments, particularly France and Germany, have ended up giving the green light to an agreement in which everyone has considered guaranteed that the public support that each country gives to its energy generation sources will not result in a lowering of the cost of electricity. electricity price that distorts competition in other Member States. This is important for domestic consumers, but especially for European companies and industries at a time when, as some ministers stressed during the meeting, protectionism is growing outside the EU, in competitors such as China and the United States. .
The reform of the electricity market proposed by the Commission and on which the Council of the EU already has a position since this Tuesday focused on two main issues.. On the one hand, increase and encourage electricity generation from renewable sources, to progressively stop depending on gas and countries like Russia and to decarbonize the economy.. On the other hand, promote long-term wholesale electricity sales contracts to provide stability to electricity prices, instead of betting everything on the daily market, which is more subject to price swings.. To this end, the new market will establish private sales contracts (PPAs), but it will also maintain, reformed, public auctions, called Contracts for Differences (CfD), to which the Commission wanted to attribute a role in supporting renewable generation. and that they have been at the center of the “controversy” that until the last moment has made the agreement difficult until this Tuesday.
The concern about the distortion of competition has been present until the end in the discussion on such technical aspects as the turns that the ministers have taken around the controversial “article 19b” of the Commission's initial proposal to determine which facilities can benefit from the direct aid systems provided for by the CfD, in principle to encourage renewables. But France has fought and managed to get the Twenty-Seven to accept that both investments in new facilities – renewable – and investments in existing facilities, to expand or repower – nuclear – can benefit from price schemes guaranteed by the States and direct aid. .
There has also been on everyone's lips a concept so familiar to EU jargon as the “level playing field” – something like the balanced situation in which all the members of a group are seen with the same opportunities as the rest -, also in view of Germany's claim to be able to redistribute any profits between the auction price of state auctions and the market price among its industries and companies and not only among consumers based on their consumption, as the Commission initially proposed. European and defended countries like Spain.
As a complement to the aid that countries will be able to give to new and existing electrical installations and to the redistribution of benefits among those who consider appropriate, the agreement in the Council will leave it in the hands of the European Commission to determine whether any of these decisions violate the aid rules of European state. “The Commission will play its role,” assured Energy Commissioner Kadris Simson, who recalled that there are “very rigorous controls for State aid and we will see the impact on the internal market of measures such as CfD for new assets or for new investments in existing ones,” he added.
Final negotiation and resignations
The agreement between European governments is the penultimate step to make the reform of the electricity system a reality. This Tuesday they have set their mandate to negotiate how it will finally be designed with the European Parliament, which approved their position in September.. As the European Parliament had proposed, Ribera has confirmed that the negotiation will begin next Thursday, October 19.
In this final negotiation it will be seen whether the new EU electricity market includes a prohibition on cutting off electricity to vulnerable customers or at risk of energy poverty or whether the demand for governments to take measures in summer and winter is maintained so that households can manage your consumption and avoid large bills as claimed by the European Parliament. It is also betting that the Commission will create some “relief clause” before June 2024 in the face of a new price crisis or limit the “right to share energy” so that large electricity companies cannot take advantage of it.
As usually happens in the EU, the final result of the EU electricity reform must satisfy as many as possible – at least, to forge a majority that allows it to be approved – but without fully satisfying the aspirations of any country.. In this sense, Spain has had to leave its great demands by the wayside.. The general one, to a more radical reform such as the one that ultimately sought to ensure that gas definitively stopped setting the price of electricity – now the same thing is being pursued by increasing renewables so much that gas is not necessary – and would be reduced to a capacity market, together with nuclear energy or storage solutions, separate from a production market, where renewables such as wind or photovoltaics will set the price.
Spain has also had to give up its intention to make structural the ceiling that the EU exceptionally placed last year on the fallen profits of electricity companies, at 180 euros Mwh, and it will not be mandatory for the redistribution of eventual The benefits of energy auctions accrue only to consumers, after both Parliament and this Tuesday the Council have opened the door so that they can also go to companies and industries.
The only specific Spanish demand that remained standing, a clear investment plan in the storage of electricity generated with renewable energy, does not seem to be concrete in this reform either.. “We have to address how the issue of storage is applied, from the beginning we have said that there are aspects that we are going to have to develop in the future, not this time,” said Ribera.
“If I had had to draft a proposal reflecting the interests of Spain, this would not have been the proposal but we exercise at this moment a privileged role of Presidency of the Council,” Ribera stressed early on the elements to which who had to resign and as “arbitrator” of the consensus among his European colleagues in favor of an agreement that would reflect “the interest of the EU”.
