Parliament approves mandate to negotiate electricity reform with EU countries

The European Parliament today approved its mandate for the final negotiation of the reform of the European Union's electricity market with the Member States and is now waiting for the capitals to agree on a common approach in order to try to close the dossier before the end of the year. The plenary session of the European Parliament approved the text by 366 votes in favor, 186 against and 18 abstentions. The European Commissioner for Energy, Kadri Simpson, thanked the rapporteur of the dossier, the Spanish Nicolás González Casares (PSOE), for his work to achieve a "balanced" text, and said that he would continue to work with the Spanish Presidency of the EU Council to "finalize the Council's position and conclude the negotiations this year".

The reform, conceived in the heat of the gas price crisis and its contagious effect on the electricity market during the last two years, aims to adapt the electricity market to the era of renewables with stable, long-term contracts at affordable prices, guaranteeing security of supply and incentivizing investments in green technologies. The European Parliament's approach maintains the request to maintain a revenue cap on marginal technologies of 180 euros/MWh. It would apply in the event of deep and prolonged price crises, such as those of 2021 and 2022, and the text also calls for EU countries to prohibit the disconnection of vulnerable customers or those at risk of energy poverty, among other points.

The EU countries, for their part, are analyzing the proposal presented last Monday by the Spanish presidency of the EU Council to bring the blocs led by France and Germany, opposed to each other in relation to the financing of nuclear power plants, closer together. This draft, to which EFE has had access, focuses on the aspects where disagreement persists and, in particular, seeks to unblock the positions of Paris and Berlin in relation to Contracts for Difference (CFD), in which the State agrees with a generator a fixed price for the purchase and sale of electricity in a given period of time and then the difference is returned. The divisions lie in whether these contracts apply to existing nuclear power plants that extend their useful life or expand their capacity, a demand of the nuclear bloc led by France but rejected by anti-atomic energy states, with Germany at the forefront.

Sources linked to the proposal define the new text as "balanced, because it preserves the autonomy of the Member States to choose their energy mix within the framework of the European objectives, and at the same time introduces controls to ensure that the preservation of this autonomy does not distort the market". In particular, the draft focuses on "direct price support schemes for new investments in generation" and proposes to set a guaranteed price for power companies if there is an extension of the lifetime of power plants. It also defines the design features of instruments to ensure the economic viability of the life of such plants and stipulates how revenues are shared to consumers after the CFD adjustment, not only for nuclear but also for wind, solar, geothermal and hydro without reservoir.

However, Member States will be able to exempt small-scale renewable energy installations. The proposal of the Spanish Presidency of the European Council details the conditions for CFDs without public tendering and establishes a remuneration scheme for consumers, especially companies, based on their total consumption without altering incentives to reduce consumption or undermining competition between suppliers.

The system would be supervised by the European Commission, which could impose limits on the redistribution of revenues to companies.