This is an important step forward in the Energy sector. The EU concluded an agreement on Thursday to reform its electricity market, in particular in order to promote investment in carbon-free energies – including atoms -, following bitter debates on the framework of public support to existing nuclear power plants.
This agreement, concluded between Member States and MEPs after a night of final talks, will “stabilize markets in the long term (…) offer more affordable electricity and improve industrial competitiveness”, welcomed the Spanish Energy Minister Teresa Ribera, whose country holds the rotating presidency of the EU.
Lower household bills
After the surge in electricity prices last year, this reform aims in particular to reduce the bills of households and businesses thanks to long-term contracts – at prices decided in advance – making it possible to smooth out the impact of volatility gas prices. The adopted text also intends to offer greater predictability to investors through the use of “contracts for difference” (CFD) at a price guaranteed by the State for any public support for investments in new carbon-free electricity production installations ( renewable or nuclear).
In this mechanism, if the wholesale market price is higher than the set price, the producer must return the additional revenues earned to the State, which can redistribute them to consumers. If the price is lower, on the other hand, the State pays compensation. CFDs will apply for public financing “in new power plants”, according to the agreement, which leaves the door open to equivalent mechanisms “having the same effects” alongside CFDs in the event of public aid on the basis of long-term price, underlines the Council press release, without further details.
It is this point which has caused the most tension, between States and in the European Parliament, in particular on the extension of the mechanism to investments intended to prolong the existence of existing nuclear power plants – France seeing in CFDs a tool essential to support the future renovation of its aging fleet.
“Flexibility” to States
For the redistribution of revenues from CFDs, another bone of contention, the agreement reached on Thursday “offers flexibility” to States, which will be able to choose to redistribute them to final consumers (businesses, households) according to their consumption, but also to used to finance investments in the sector or support schemes reducing bills – a key point for strengthening the continent’s industrial competitiveness.
The text also provides, in the event of a new lasting surge in prices, the triggering of a crisis situation at European level allowing States to adopt price shield type measures to protect vulnerable households and businesses.
The compromise provides that the Council of the EU (which brings together the States) will have the power to decree such a crisis “on a proposal from the European Commission”, while avoiding “distortions or undue fragmentation” of the common market.
Finally, the text strengthens the protection of “vulnerable consumers and those in situations of energy poverty”. “Europe will have a socially fair electricity market, thanks to measures that will guarantee affordable prices and accelerate the energy transition,” commented Socialist MEP Nicolas Gonzalez Casares, rapporteur of the text.