Europe agrees to reform the electricity market with technical doubts about possible “competition distortions” between the 27

2023-10-17 19:09:49

Updated Tuesday, October 17, 2023 – 19:09

The Council of the EU has reached a general agreement that has gone ahead with the only vote against Hungary and that opens the way to start the talks, which will begin this Friday

Acting Vice President of the Government Teresa Ribera today in Luxembourg.

The Government is one step closer to achieving one of its priority objectives within the Spanish Presidency of the European Council: sealing the reform of the community electricity market before December. The Twenty-seven have reached a general agreement this Tuesday, with the only vote against Hungary, which opens the way to start this Friday the so-called triloguesas the negotiation between deputies and governments with the technical assistance of the European Commission is known.

“It has been a successful Energy Council,” said the Energy Commissioner, Kadri Simpson, who thanked the role of Teresa Ribera, acting vice president of the Spanish Government, who has led the negotiations between the 27. Simpson has described the document consensus as “balanced”, although it has recognized that there are still technical doubts about possible “distortions of competition” between member states.

A priori, the big obstacle to sealing a rapprochement between the 27 was the issue of contracts for differences (CFDs in the jargon). These are mechanisms that allow the intervention of energy prices, similar to the Spanish renewable auctions. In them, a certain price is agreed upon and, if the market closes below it, the producer is compensated for the difference, hence the name.

The big clash at this point has been between Spain, Germany and France. The latter wanted these CFDs to include financial support for nuclear energy, something that neither Germany nor Spain conceived of at first, as they were inclined to limit this mechanism to renewable energy. The recent agreement led by Ribera, however, has admitted the French claim regarding atomic energy, always “under the subsequent supervision of the Commission”within the framework of Community state aid regulations.

As a result of the agreement, which has yet to be debated between parliamentary institutions, French nuclear energy will be more competitive in terms of price. Although this “sacrifice” on the part of Spain has already raised blisters among the national electricity companies, the truth is that otherwise reaching an agreement with such a consensus would have been almost impossible.

“We have achieved that all investments that want to be subject to CFDs can do so, that Member States can use instruments that impact stability and the price that consumers ultimately pay,” Ribera highlighted in his appearance from Luxembourg. The acting vice president has specified that Hungary’s opposition is not attributable to this point of friction, but rather to other issues of commercial impact.

Brussels’ decision to carry out substantial modifications to the rules of the electricity market dates back to the shock of the Russian invasion of Ukraine, which sent electricity and gas prices skyrocketing and endangered the EU’s energy supply. “The war in Ukraine made it clear that it was important to introduce changes in the regulatory framework to encourage investment in clean energy, in order to quickly decarbonize our economy“Ribera contextualized.

“Spain has managed to get both Germany and France to give in and, although Parliament’s position is different and we are going to have discussions about CFDs, I think it is very positive that they have agreed so that we can start dialogues as soon as possible,” the Spanish MEP shares with EL MUNDO. Nicols Gonzlez Casares (S&D – Socialists and Democrats).

The debate now, and the role of the Commission as referee, will now focus on guaranteeing that there are no distortions that affect competition between the 27. “In a certain way, from the Council’s position, support is given to CFDs such as the election scheme for public support for new installations, but it will have to be the Commission that evaluates whether support for existing installations could fragment the internal market,” explains Casares.

For their part, private sector sources emphasize that with the present agreement “France wins and Germany accepts with control of the Commission… the alternative was for each country to do what it wanted on its own, as the French minister of the sector threatened this morning.”