EU Parliament passes far-reaching reform of the electricity market

Brussels The European Parliament wants to lower electricity prices for households and companies in the long term and keep them stable. The Industry Committee agreed on a new electricity market design in the EU on Wednesday.

According to this, wind and solar park operators should be able to get long-term purchase guarantees at previously fixed prices from the state. In return, they should sell their electricity on favorable terms, even when market prices are high.

This is intended to dampen end customers’ electricity prices and avoid a situation like that during the energy crisis last year, when prices rose to unexpected heights.

According to Parliament, the extension of the lifetime of nuclear power plants should not be promoted in this way. It is possible that France will push for precisely this in the forthcoming negotiations.

German MEPs were satisfied with the decision. “We managed to assert all of our positions and to reach a compromise with the other parliamentary groups that best serves the interests of everyone involved, from consumers to industry,” said Christian Ehler (CDU).

No taxes on balcony solar systems

Green MP Michael Bloss emphasized the social aspects of the reform. Electricity providers should be forbidden to turn off the electricity of defaulting households. It should also be possible to pass on energy that a household or company has produced itself with the solar system on the roof to other users.

In the future, solar systems on the balcony should also be able to produce a certain amount of electricity without incurring grid fees or taxes.

In negotiations with the Council of the 27 Member States and the Commission, Parliament must now find a compromise. While MEPs opted for a fast-track procedure and are now ready to negotiate, member states are still divided. They are discussing whether nuclear power plants should be extended in service life or new gas-fired power plants should be built.

>>Read here: France sharply criticizes German energy policy

Before the negotiations on the design of the electricity market, experts and companies had feared that the expansion of renewable energies would suffer as a result of a reform. This would not be the case with the purchase guarantees if Parliament were to prevail with its position.

Business associations welcomed the fact that companies were given more planning security. The energy expert of the Association of German Chambers of Industry and Commerce (DIHK), Sebastian Bolay, was relieved “that Parliament does not want to introduce a permanent skimming of proceeds”. Such a skimming of particularly high profits had been temporarily introduced during the energy crisis.

Kerstin Andreae, Managing Director of the Federal Association of Energy and Water Industries (BDEW), emphasized that financing the expansion of renewable energies must be the focus of the electricity market reform. “The electricity markets must continue to be designed in such a way that they support competition and the internal energy market.”

The European Steel Association pointed out that governments should be given the opportunity to introduce subsidized industrial electricity prices. However, the reform is only suitable to a limited extent for reducing the electricity price to a sustainable level in the short term. You need “structural solutions” beyond complex subsidy programs.

Economists warn against blanket electricity subsidies

Economists also see weaknesses. “It is unclear whether this reform will really accelerate the expansion of renewable energies,” says Georg Zachmann from the Bruegel Institute in Brussels. Funding instruments are planned that can make the construction of solar and wind parks even more attractive. However, the reform also leads to many inefficiencies.

>> Read here: Germany is so dependent on electricity from abroad

“We need incentives to generate electricity at times of the day and in places where it is scarce,” said Zachmann. That could mean orienting solar arrays east and west to generate electricity in the early and late hours of the day, or building power plants in those locations that are particularly poor in electricity. Freely fluctuating wholesale prices for electricity are the best signal for sensible investments, says Zachmann.

In addition, the reform will probably ultimately give the member states a lot of leeway in terms of which power plants they subsidize. “Each country will use the EU’s guard rails differently and set up different funding systems,” said Zachmann.

Germany will find ways to promote gas power plants, France will continue to rely on nuclear power. “An efficient European electricity system will not come about in this way.”

More: Brussels rejects federal government plans for new gas-fired power plants

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