The Commission defends a watered down adjustment plan and looks to after the Spanish presidency for its entry into force
In just over twenty days, the European Commission received 1,350 comments to the public consultation on the reform of the community electricity market. Once analyzed, the Community Executive is clear on two issues. The first is that the wholesale electricity market (pool ) has generated great benefits for Europe and, although it needs adjustments to reduce the scares on consumer bills, it still works. The second, that a Spanish-style reform would have unleashed a flight of renewable investors from Europe to other geographies.
The debate on a new electricity market divided the continent into two blocks from the beginning. Germany and the Nordic countries, with a conservative bet. Spain and France, with a clearly disruptive proposal. In view of the road map that the Commission officially presented on Tuesday, the continuation front has won the battle.
“There is consensus that emergency mechanisms should not be introducedsuch as those that have arisen in this crisis, in the European regulation”, agree sources from the European Commission. The calendar that Brussels manages requires that the changes adopted start to apply before winter 2024but it is not contemplated that they can enter into force before the end of the year, as Spain claimed.
The document that Brussels has put on the table (and that will mark the imminent debate in Parliament and the Council) involves more a battery of adjustments than a comprehensive reform of the market as Spain proposed. The objective of the Commission is to mitigate the volatility of the electricity bill, promoting forward markets, so that all consumers have access to electricity contracts of a minimum duration of one year.
To this end, the Community Executive proposes promoting bilateral contracts (PPA), signed bilaterally between consumers and generators. In addition, it assumes one of the mechanisms proposed by the Spanish plan: the so-called long-term contracts for difference (CfD). In them, a maximum price for energy is set and, if at the end of the contract, its market value has exceeded the set limit, the producer receives the difference.
The latter has served the Ministry for the Ecological Transition that directs Teresa Ribera to sell the Brussels proposal as a success. The truth is that the Commission’s document means burying the Spanish government’s plans to practically replace the current wholesale market with an intervened model where a good part of the energy sale agreements would be managed by a regulator. In practice, that the State sets the prices, something that is not liked in Brussels.
When asked about it, sources in Brussels reported that a substantial part of the queries received in the public consultation process would have warned that this model of prices set by decree would cause a situation of “regulatory uncertainty” and would generate “concern” in the markets. “Adopting retroactive measures, in addition to the fact that in many cases, as in the case of renewables, it is prohibited by law; does not promote investment and threatens to divert it to other countries“, Zanjan.
The Commission will now forward the proposal to Parliament and the Council. Both bodies must decide by which procedure the text will be processed. “The logical thing is to opt for the ordinary procedure,” say parliamentary sources. This would prevent the Government from closing the process during the six months (from June to December) of the Spanish presidency. The Executive had assumed that, from this position, it would be easier for them to gather greater support among their European peers with which to promote more drastic changes in the pool. The setback of the Brussels proposal and the extension of the calendar strewn the path of the reformist block.
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