Brussels mulls value cap on renewables and nuclear energy to curb electrical energy payments, draft suggests

The European Union might set a most value on the electrical energy generated by non-gas producers, particularly renewables and nuclear, with the goal to boost further income and convey down hovering energy payments, based on draft plans circulated by the European Fee.

The measure needs to be accompanied by an EU-wide plan to chop down electrical energy demand, just like the 15% gasoline discount plan agreed earlier than the summer time break.

The concepts, contained in a leaked non-paper seen by Reuters and different media retailers, don’t represent an official coverage announcement and are set to be mentioned by EU vitality ministers once they collect subsequent Friday for an emergency assembly.

The Fee believes each the worth cap and the consumption demand plans may very well be quickly applied to supply immediate reduction throughout the financial system, though it’s unclear how a lot.

The leak comes simply days after European Fee President Ursula von der Leyen pitched an “emergency intervention” within the electrical energy market to tame the spiralling costs which can be placing households and corporations beneath excessive monetary stress.

She additionally spoke of a “structural reform” however in the long run.

The Fee chief is scheduled to ship her annual State of the Union tackle on 14 September, when she is anticipated to unveil additional particulars on options to deal with the worsening vitality disaster.

“The skyrocketing electrical energy costs are actually exposing, for various causes, the restrictions of our present electrical energy market design,” von der Leyen stated on Monday.

“[The market] was developed beneath utterly completely different circumstances and for utterly completely different functions. It’s not match for function.”

Marginal pricing beneath scrutiny

In her public assertion, von der Leyen appeared to seek advice from the mannequin of marginal pricing that at the moment governs the liberalised electrical energy market.

Below this method, all electrical energy producers – from wind and photo voltaic to fossil fuels – bid into the market and provide energy based on their manufacturing prices. The bidding begins from the most affordable sources – the renewables – and finishes with the most costly ones – on this case, gasoline.

Since most EU nations nonetheless depend on gasoline to fulfill all their energy calls for, the ultimate value of electrical energy is commonly set by gasoline, even when clear, cheaper sources additionally contribute to the entire provide.

The system was initially praised for enhancing transparency and selling the change to inexperienced vitality, however Russia’s invasion of Ukraine has created unprecedented instability.

The continued provide manipulation by Gazprom, Russia’s state-controlled vitality big, has put buyers on edge, resulting in rampant hypothesis and record-breaking costs.

“We’d like a brand new market mannequin for electrical energy that actually capabilities and brings us again into steadiness,” von der Leyen stated.

The doc drafted by her govt rejects extra drastic concepts, reminiscent of a far-reaching cap on all electrical energy, subsidies for carbon emissions permits or an outright suspension of the wholesale market.

As a substitute, it suggests a extra focused cap for non-gas producers – wind, photo voltaic, hydro and nuclear energy – who’ve seen a surge in income beneath the market design decided by gasoline.

The distinction between the ultimate electrical energy value and the agreed-upon cap would represent a supply of additional revenues for governments. The funds might then be was direct earnings assist for the worst-hit households and corporations.

This value cap wouldn’t be suitable with the windfall taxes on vitality corporations that nations like Spain and Italy have launched in latest months, the Fee warns, as a result of these distinctive measures are broader in scope.

The chief additionally dismisses the opportunity of making use of the Iberian mannequin – a subsidised cap on gasoline costs – to all the EU market, fearing it might incentivise the next consumption of gasoline throughout the bloc.

Most specialists insist that marginal pricing continues to be the perfect market mannequin in regular occasions and any intervention needs to be exact and time-limited. Vitality financial savings, they are saying, stay the perfect device for the EU to make it safely by way of the winter season.

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