According to European Commission President Ursula von der Leyen, consumers are the main beneficiaries of the reform of the European electricity market, which was proposed in Strasbourg on Tuesday. “At the heart of this reform are consumers,” von der Leyen said in an interview with agencies from the European Newsroom on Monday, adding that the proposed reform of the electricity market would “drastically reduce the impact of gas prices on the price of electricity.”
“A fundamental objective of the reform is to bring the benefit of the low cost of renewables to consumers,” von der Leyen stressed. The European Commission wants to reform the electricity market to prevent skyrocketing prices for consumers and promote the expansion of renewable energies. Electricity prices had risen extremely last year. One of the reasons for this was that at times around half of France’s nuclear power plants were out of action. In addition, the rise in electricity prices was a result of much higher gas prices due to the Russian war of aggression on Ukraine.
The head of the European Commission said that the “intraday [electricity] market works well, but we have to improve on long-term contracts.” Wholesale prices on the electricity market change from hour to hour, depending on supply and demand. At times of low demand, for example at night, prices are lower because electricity from renewable sources is sufficient to meet demand. And production costs from renewable sources are very low. In times of peak demand, however, the output of nuclear plants, coal-fired thermal power plants and gas power plants has to be added as well. The price of electricity is determined at all times by the last producer to be added to the chain, for instance gas-fired power plants. Therefore, some EU countries have been asking for months to redesign the wholesale electricity market so that the price of gas is decoupled from the price of electricity.
However, the decoupling of gas and electricity prices, as suggested by President Ursula von der Leyen in recent months, is not included in the proposal. Instead, the European Commission left the current system unchanged, maintaining that the proposed reform will encourage a phase-out of fossil fuels and reduce their impact on electricity prices.
Under the new proposal, state subsidies for new investments in wind farms, solar energy, hydropower, geothermal energy and electricity from nuclear energy are implemented through two-way “Contracts for Difference, long-term buy-sell agreements.” Long-term contracts for power generation from renewable energies and nuclear power are to be promoted in particular, according to the proposal presented by the European Commission in Strasbourg on Tuesday. The Commission also wants to encourage private and public investment in renewables and nuclear power.
EU member states have yet to agree
Von der Leyen is counting on the EU member states and the European Parliament to conclude negotiations on the new proposal by the time of the European elections in May 2024. This, she said, has been well thought out and intensive consultations have been held with experts. “That’s why I think it’s worth working hard to get it ready before the European elections.”
According to a press release from the Slovenian Ministry of the Environment, Climate and Energy, the proposal does not yet adequately address some other aspects of high energy prices that member states discussed as part of emergency measures last year. These challenges are the liquidity of electricity suppliers and measures to prevent speculative trading. Another challenge is recognizing the role of investments that facilitate a transition from coal to gas.
Unlike France and Spain, for example, the German government is likely to welcome the fact that the EU Commission is foregoing quite far-reaching changes for the time being. Germany, together with countries such as the Netherlands, Denmark and Luxembourg, had recently repeatedly warned against a hasty reform.
When asked if the Commission supports the use of nuclear energy to achieve the set climate goals, von der Leyen said that “the type of energy mix with which each member state wants to achieve the climate objectives depends on them.” France is pushing for the recognition of nuclear power as a low-carbon energy source, with Germany as one of the main opponents. Von der Leyen added that it is important to stick to the jointly established goals of climate neutrality by 2050 and reducing greenhouse gas emissions by 55 percent by 2030.
Reducing dependence on China
Speaking about the EU’s relations with China, von der Leyen said on Monday:
“For the European Union [it] is important to de-risk but not to decouple from China.”Ursula von der Leyen
“De-risk means we do not want the dependency we experienced with Russia and fossil fuels. We do not want dependency, for example, on critical raw materials, and therefore we are diversifying and we are strengthening our supply chains with like-minded partners,” she said.
At the same time, according to the President of the Commission, it is important to cooperate in mitigating climate change, to limit global warming and to ensure equal market conditions for all. “Therefore, we want our companies to have access to the Chinese market, we want transparency in terms of subsidies and a clear commitment to respecting intellectual property,” she said.
EU unveils clean tech plan amid competition from US and China
The European Commission is set to present its Net-Zero Industry Act on Thursday in a bid to help Europe challenge the financial power of the United States and China in the field. The EU’s new Net-Zero Industry Act will be published alongside a text on “critical raw materials”, which aims to secure EU supplies of rare earths critical for green tech.
“The package proves that we can cut emissions and have a growth strategy, because we see now globally that there is a strong push for clean technologies and we want to stay the frontrunner in that industry,” von der Leyen said. She added that the clean tech industry is crucial for Europe “not only to meet our climate goals, but also to innovate in the industry in a way, that with limiting global warming, we are the ones who are exporting our technology.”
Brussels was pushed into unveiling its own plan after EU states criticized US President Joe Biden’s “buy American” subsidy program, the Inflation Reduction Act, as discriminatory against their industries. But critics now warn that leaked drafts of the Commission’s proposals show the EU could follow suit and look to deter clean tech imports in a bid to help its own companies. However, European Commission President Ursula von der Leyen denied on Monday that the EU’s response to huge US green subsidies was “protectionist.”
“This is our decision to invest in the net zero industry and to facilitate the development of new clean technologies, so to cut red tape and to reduce the bureaucratic burden, to have timelines in the permitting processes so that we speed up,” von der Leyen told agencies in the European Newsroom. “But there is not a single point that is protectionist. On the contrary, it’s a very open act.”
This article is published Fridays. The content is based on news by agencies participating in the enr.