The European Comission finalizes the proposal with which he aspires to reform the European electricity market to limit the “excessive impact & rdquor; of gas in setting the price of electricity, adapting its configuration to the new reality that the EU is experiencing after the serious energy crisis of last year caused by the war in Russia and promoting the development of renewable energy. The plan, which if there are no last-minute changes will be presented next March 16pleads to guarantee Fixed prices to protect consumers of the high volatility as well as long-term and more stable contracts to ensure the competitiveness of the european industry although without giving up the marginal pricing model because “it provides the right price signals & rdquor ;.
“The reflection of short-term prices in the consumer bills caused a price crisis where the energy bills of many consumers tripled or quadrupled, even when the costs of wind and solar energy were falling (…) Therefore, the proposal includes a series of measures aimed at creating a buffer between short-term markets and electricity bills paid by consumers& rdquor ;, points out the draft that the Commission finalizes. In particular, Brussels points out, encouraging long-term contracting, better integrating renewable energies into short-term contracts and training and protecting consumers.
To improve the protection of these, the proposal establishes the right of consumers to fixed prices, multiple contracts and clearer information. “Consumers should always have the possibility to opt for a contract affordable, fixed-price, fixed-termand suppliers must not unilaterally modify the conditions before said contract expires& rdquor;, indicates the document that maintains that in this way risk-averse consumers “will be able to set safe prices in the long term to avoid surprises, and/or opt for dynamic price contracts with providers if they want to take advantage of price variability to use electricity when it is cheapest”.
Regulated prices in crisis
Brussels also proposes facilitating the access of domestic consumers and SMEs to regulated retail prices in case of crisis and stabilize the industry by requiring suppliers to do more to protect against price spikesmaking more use of future contracts with generators and by requiring Member States to establish a provider of last resort regime. In addition, it advocates giving more power to consumers when creating the right to directly share renewable energy (self-consumption), without the need to create energy communities, for example “sharing surplus solar energy from the roof with a neighbor & rdquor; which, according to Brussels, could improve the use made of low-cost renewable energy and provide greater access to direct use of it for consumers who otherwise would not have access.
Regarding the measures to improve the competitiveness of the European industry and protect it from price volatility, Brussels is committed to creating a stable framework and encourage long-term contracts. Currently, power purchase agreements – long-term private contracts between a generator (renewable or low carbon) and a consumer – are only available to large energy consumers. in very few Member States. This, according to the Commission, represents a obstacle which Member States should circumvent using financial instruments such as state guarantees to ensure that they are covered against any risk. To further encourage this type of agreement, he also suggests allow promoters of renewable energy projects that participate in a public tender (auctions) reserve a part of the energy generated for sale through purchase agreements.
Related news
The draft of the proposal, which still needs to be approved by the commissioners college and can be subject to changes, it also contemplates the so-called “contracts for difference & rdquor; in which governments can guarantee investors in low-carbon energy projects a fixed price, with a minimum and a maximum, so that any revenue above the cap is returned. The latter would only be for the “new investments & rdquor; in renewables (wind, solar, geothermal and hydraulic) and nuclearbut not as Spain proposed for old installations.
By improving long-term contract markets, the European Commission hopes to meet another of the objectives of the reform: boost investment in renewable energya key piece for reduce the use of fossil fuels. “Power purchase agreements and contracts for difference not only offer stable prices to consumers, but also provide reliable income to suppliers of renewable energies. This lowers your financial risk and greatly reduces your cost of capital& rdquor;, the Commission argues about a “virtuous circle& rdquor; that will help reduce costs and boost demand of renewable energies. The proposal also proposes the creation of demand management mechanisms –remuneration to certain consumers so that they are available when necessary– to reduce consumption peaks at certain times of the day and requires Member States to assess their needs for power system flexibilityestablish goals to satisfy them and introduce new options of flexibility support systems.