EU reaches agreement to reform EU electricity market

The European Parliament, the Council of the EU and the European Commission today reached a political agreement to reform the EU electricity market that promotes the deployment of renewable energy and promotes stable and affordable prices for consumers. “It’s done,” said the European Parliament’s chief negotiator, Nicolás González Casares (PSOE).

The political pact arrived after ten hours of negotiation at the headquarters of the European Parliament in Strasbourg (France) and will still have to be validated both by the Council of the EU, which represents the member states, and by the plenary session of the European Parliament. Parliament.

It is a market adjustment designed in the heat of the energy price crisis of 2021 and 2022 and aims to bring the European Union closer to its climate goals and away from Russian hydrocarbons.

Consumers

The agreed text includes several measures to strengthen consumer protection and establishes criteria allowing the Council, on a proposal from the Commission, to declare an energy crisis.

States should then adopt measures aimed at lowering prices for vulnerable and disadvantaged customers, with provisions aimed at avoiding “unjustified distortions of the internal market”, the Council said in a press release.

“Consumer protection increases significantly,” said González Casares, who added that the pact also prevents companies from “unilaterally modifying contracts” and emphasizes that “member states will ensure that consumers are fully protected against disconnections “.

Fight between France and Germany

The most important part of the story is a preview of the final negotiations between the Council and the Eurocamera and the confrontation between Paris and Berlin has proposed contracts by difference (CfD, in English) and its application to nuclear power plants Operating.

CfDs allow the State to agree on a stable price for the purchase and sale of electricity over a fixed period with a generator and then automatically return the difference depending on whether the final price was higher or lower than that agreed .

France, with a large nuclear fleet, wanted to apply this system to operating nuclear power plants and practically depreciated them, but Germany feared that this could function as secret state aid to French industry, which could obtain electricity at a lower price than in Germany.

Member state energy ministers finally agreed on a common approach in October, under the Spanish presidency of the EU Council, so that the CfD could be applied to all new generation installations, those which increase their capacity and extend their lifespan. , whether nuclear power plants or other technologies.

However, according to the agreement between the capitals before the final negotiation, these contracts will not automatically apply to existing power plants, but – as until now – they will have to obtain the approval of the European Commission, which will analyze them accordingly. state aid regime, but with simplified criteria.

Parliament had taken up in its position the general lines of the pact between capitals concerning contracts for difference and in the final agreement it only added that “equivalent measures” to CFds with the same effect “can be used to support nuclear or renewable.

“The rules relating to two-way CFDs will only apply after a transition period of three years following the entry into force of the regulation, in order to maintain legal certainty for ongoing projects,” specifies the Council.

The agreement also introduces a “potential and exceptional exception to the application of the CO2 limit for already authorized capacity mechanisms, where duly justified”, indicated the Council regarding a provision requested by Poland.

The reform includes, in parallel, a regulation (REMIT) aimed at improving protection against market manipulation, adopted last November.

Less than a year

In March this year, the European Commission presented its market design proposal, which it had already been working on with member states to facilitate its rapid processing.

Nine months later, an agreement was reached for the first in-depth reform of the electricity market in two decades, an agreement which, if there are no surprises, will be officially approved in early 2024.

The President of the Spanish Government, Pedro Sánchez, discussing this Wednesday the six months of Spanish presidency at the head of the Council of the EU before the plenary session of the European Parliament, described this adjustment as a “historic reform of the electricity market”. “

“In addition to promoting the need to promote renewable energies, this will make electricity prices lower, more stable, will insert greater transparency into the system and therefore more information for consumers” and “this will protect the citizens against possible abuses by energy multinationals,” he said. said.

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