The energy ministers of the European Union meet this Monday in Luxembourg. An appointment that will serve to address key issues such as preparations for next winter, relations with energy partners and the Spanish presidency of the Council. The agenda has as a key issue the establishment of a joint position on the reform of the European electricity market. The ‘boss’ of the electricity companies in Europe has decided to send a letter to warn of certain dangers of this legislative deliberation, such as betting on the ‘Spanish plan’.
“Our concern is amplified by the possible extension of the cap on submarginal rent as currently being discussed in the European Parliament,” Leonhard Birnbaum, CEO of the German utility E.ON and president of the European employers’ association Eurelectric, comments in his letter. “Youto the approach would lead member states to end up in a ‘semi-permanent crisis mode’ where disproportionate and inefficient market interventions, like below-cost pricing, with unclear compensation guidelines would become the rule,” he adds.
Birnbaun refers to the negative impact that the establishment of a ceiling (‘cap’) on income from inframarginal technologies (renewable, hydraulic or nuclear) and the intention of wanting to extend it has had on countries like Spain. Europe proposed setting the limit at 180 euros per megawatt hour that this electricity generation receives, in Spain it was limited to 67 euros in September 2021. For eurelectricthe employers’ association that represents companies such as Iberdrola or Enel (owner of Endesa), raising it in the reform debate, as Spain bets, is a danger.
The electrical giants of Europe agree with the reform proposal that came out of the European Commission. A ‘light’ reform, with small tweaks, that facilitates ‘green’ electrification for the decarbonisation of Europe and reduces dependence on imported fossil fuels. The Energy Council next Monday will serve for the third power of the EU to establish its “general approach” on this issue after learning about the Commission’s proposal and after opening the debate in Parliament.
Emergency measures should only be developed to meet the specific needs of crisis situations
Leonhard Birnbaum (Eurelectric)
“The reform of the design of the electricity market is an opportunity to strengthen the integration of the internal energy market, not to weaken it,” says Birnbaum. “Emergency measures should only be developed to meet the specific needs of crisis situations and should always have a temporary time limit and, last but not least, be targeted at customers who really need them. Widespread retail price regulation leads to inefficient energy use and hurts the business case for decarbonization”, points out the highest representative of the electricity companies in Europe.
Consensus in Europe
The representative of the sector sees positive the approach that the European Council has made to the plan of the European Commission for long-term contracts. “More importantly, we very much welcome the Council’s failure to support the use of contracts for difference at a regulated strike price for existing generation plants; such retroactive implementation would greatly compromise the safety of investors”, explains the president of the employers’ association.
Eurelectric also calls at Monday’s meeting to address the massive growth of the network and the challenge of digitization. They believe that the benefit of renewable energy and consumer flexibility can only be reaped to the extent that grid deployment is maintained.
“The reform must ensure that the design of network tariffs provides positive incentives to system operators and ensures un timely recognition of traditional investments in physical networks and adequate returns, with a flexible reflection of operational costs and removing all existing barriers at the national level for the necessary investments in reinforcing the network”, points out his letter to enter the debate on June 19.
A day that will be key to knowing how the debate on the reform of the electricity market in Europe can come out.
