Energy / /
EU Council reaches agreement to reform the electricity market with the main goal of shielding consumers from price volatility
With the aim of stabilizing electricity prices and reducing dependence on fossil fuels, the Council of the European Union reached an agreement on October 17 on the general principles for reforming the electricity market.
This agreement opens a trialogue (Parliament, Commission and Council) that will lead to the final agreement by early 2024.
Three main proposals are made:
- With regard to long-term electricity markets, the aim is to facilitate companies’ access to PPA contracts, promoting state-backed guarantee schemes at market prices, private guarantees and facilities or structures that pool consumer demand. In addition, it is proposed that contracts for difference (CfDs) be the mandatory model for use in new non-emitting installations (solar, wind, geothermal, hydro-flow), but their scope is also broadened. This will allow France to apply them to nuclear plants extending their useful life and Poland to its coal-fired plants.
- As for capacity markets, their temporary nature is eliminated and eligibility requirements are relaxed, allowing the allocation of capacity to CO2 emitting technologies until 2028, with the main beneficiaries being coal-fired plants in Germany and combined cycle plants in Spain.
- Finally, the possibility of continuing to limit revenues from inframarginal technologies (windfall profits) is extended until June 2024.
It is therefore a proposal that aims to reduce (at least in part) the effect of fossil fuels on electricity prices, accelerate the integration of renewables and protect consumers, while reinforcing the European Union’s status quo stance on energy issues, without modifying the marginalist market.
As regards Spain, the relaxing of the requirements for convening capacity markets and the possibility of continuing to collect windfall profits until mid-2024 are particularly notable. In short, the central idea is to encourage longer term contracts (PPAs and CfDs) so that, in the event of a new energy crisis, marginal market prices will have a much lower impact than at present.