By Kate Abnett
BRUSSELS – A reform of the European Union’s electricity market next year may consider extending an existing emergency limit on non-gas-fuelled power plants’ revenues to be more permanent, a draft document showed.
Soaring gas prices have fed into high electricity costs across Europe this year, prompting the EU to plan a reform of its power market to reduce the impact of gas prices on power bills for industry and households.
A European Commission document, seen by Reuters, sketched out ideas for that reform – which it said Brussels will propose in time for a meeting of EU country leaders on March 23.
The Commission will consider options to stop non-gas generators from receiving “excessive” revenues – possibly by extending an emergency measure the EU rolled out this year, which claws back revenues from generators to invest in countries’ green transition and by helping consumers with high energy bills, the document said.
“One possible option would be to apply such a revenue limitation on a more permanent and harmonised basis or to activate it specifically in crisis situations,” said the draft document, which could still change before it is shared with EU countries.
European electricity prices are set by the production costs of the last power plant needed to meet demand – typically, a gas plant.
Soaring gas prices this year have made it possible for lower-cost non-gas power producers to sell their electricity at high prices set by the cost of gas generation, despite not facing higher fuel costs.
But industry groups say many renewable generators have not reaped such rewards, since they already sell their power under fixed price contracts – and have warned capping revenues could deter investors from the massive expansion of renewable generation needed to meet climate goals.
“It is clear that the changes under discussion would have wide-ranging impacts on market participants. This in turn could also affect the mood of investors,” said Kristian Ruby, secretary general of power industry association Eurelectric.
Another option could be to encourage different types of payment contracts for new non-gas power plants entering the market, like wind and solar farms, to try to keep power prices low for consumers while guaranteeing a predictable revenue stream for the generators, the document said.
This could be done through incentives for power consumers to agree long-term power purchase agreements with power plants, or tenders where power plants would bid for government provided contracts-for-differences, it said.
