The federal government, together with other EU members, warns of damage to the expansion of renewable energies, competition and cross-border electricity trading.
(Photo: dpa)
Brussels It sounds like a matter of course what Germany and other EU states reminded their partners in a letter on Monday: “Any reform that goes beyond targeted adjustments to the existing framework should be underpinned by a thorough impact assessment and not passed in crisis mode,” says a letter on the design of the European electricity market.
But the federal government fears exactly that: that under the impression that the energy crisis has actually already been overcome, a reform that will burden the electricity market will now be implemented. The expansion of wind and solar power could suffer, countries could restrict cross-border electricity trade in the future, and in the long term electricity prices could also be higher than necessary.
In addition to Germany, the senders of the letter also included the Netherlands and other smaller countries: Denmark, Estonia, Finland, Luxembourg and Latvia. Together they are opposing a trend that they believe is jeopardizing the achievements of past electricity market reforms: in January, France and Spain outlined their ideas for a reorganization, calling for more state control and less fluctuating prices.
They want the prices for wind and solar power to be regulated by contracts for difference (CfD). It sets a constant electricity price that the operators of the systems can demand on the market. As long as the market price is below this reference price, the state pays the difference to the electricity producer. The electricity producer has to pay for this if the market price is above the reference price.
Should such contracts be required for new or even for existing systems, prices could be reduced in the short term. This is obviously what the proponents of a rapid reform are after.
Low prices now or in the future
The price reduction comes about because electricity prices are currently particularly high, but falling electricity prices are expected in the coming years. A contract for difference would fix an average of these current and future prices.
>> Read here: EU Commission starts reform of the electricity market – and raises concerns in the eco-industry
Economists and renewable energy companies also expect incentives to build new wind and solar plants to decrease as CfD becomes mandatory. This could cause long-term damage to the European energy market.
The German government therefore warns in the letter: “The EU must not lose sight of what is necessary to achieve the overarching goal, namely the ambitious medium- and long-term climate and energy goals while at the same time guaranteeing security of supply and affordable prices.” CfD should only play a role if they advance the energy transition, do not damage investor confidence and allow adjustment to current market situations. To do this, they would have to be “cleverly designed,” according to the letter.
It is part of the standard program to calculate all of these forecasts in detail in an impact assessment before the EU Commission presents a legislative proposal. But there is no time for that if she wants to keep to her schedule: the publication is already planned for March.
Hurry to Ursula von der Leyen
Up until this Monday, the commission had received feedback on the first reform ideas. She had sent 65 questions to stakeholders. Just looking through the answers and taking them into account in the draft law should take several weeks.
Last year, the President of the EU Commission promised new rules for the electricity market that would allow customers to benefit from the low generation costs of wind and sun.
(Photo: Reuters)
After the Commission has made a legislative proposal, the EU Parliament and the member states can still make changes in order to finally agree on a final law. However, the Commission has the right to propose at least functioning, fully developed laws. The results of their impact assessments often also determine the discussions in the further legislative process.
EU Commission President Ursula von der Leyen promised new rules for the electricity market last year that would allow customers to benefit from the low generation costs of wind and sun. If she wants to keep her promise, the date for the legislative proposal cannot be pushed back much further. A new European Parliament will be elected in spring 2024. If the law has not been officially passed by then, it will be postponed for a long time.
More: Spain’s economy minister on energy costs – “Our approach was very different from the German one”