Few countries were convinced that the miracle would occur. But the vice president and Minister of Ecological Transition, Teresa Ribera, was convinced that an agreement must be closed to reform the electricity market. And so it was, after several hours of negotiations, the crossed vetoes of France and Germany dissipated, and the Twenty-seven were able to close an agreement for the reform of the electricity market, which seeks to reduce volatility in prices. With this green light, negotiations with the European Parliament will begin.
“I do not contemplate a possibility of not reaching an agreement today (yesterday),” Ribera assured before starting the meeting, a meeting that was chaired by Spain holding the rotating presidency of the Council, but the truth is that a few hours before starting several delegations were skeptical. Even in the first discussion that took place yesterday morning, the German Energy Minister, Robert Habeck, called the Spanish proposal “disappointing.” However, after a meeting of almost eight hours, and several bilateral meetings, the agreement was reached, with only Hungary’s opposition.
Finally, it was possible to close an agreement after negotiations in which the most controversial point, which had hindered progress, was the issue of contracts for difference. With this type of contract, a price guaranteed by the State is stipulated between the buyer and the generator and then the difference is reimbursed based on the actual price, which in practice becomes a subsidy. In this way, the generator always receives stable income for the electricity it produces and price volatility is reduced.
These long-term contracts can be used both for new investments in renewable and nuclear energy – something already provided for in the Commission’s initial proposal – but also for existing plants. “We allow contracts for difference to be used in case of investments to expand capacity” and also to extend the useful life of [existing nuclear] plants, the agreement says. A clear concession to France, which insisted on this issue from the beginning of the negotiation. In exchange, additional controls will be introduced by the European Commission, which has committed to ensuring that there are no distortions in the markets and will ensure this within the framework of State aid. This is the concession that has been made to Berlin.
Likewise, in the interests of an agreement, the benefits achieved thanks to contracts for difference will have more flexibility and countries will be able to decide whether they go to final consumers, or serve to reduce electricity costs. “We have reached an agreement that would have been unimaginable just two years ago. Thanks to this agreement, consumers across the EU will be able to benefit from much more stable energy prices, less dependence on the price of fossil fuels and protection against future crises,” said Ribera.
The reform negotiations, questioned because they were less ambitious than initially expected, have been, above all, very marked by the Franco-German division. Since last June, when an attempt was made to reach an agreement, it was clear that the two blocks were far away. On the one hand, France along with a dozen central and eastern countries and its staunch commitment to nuclear energy; and Germany, with the support of Belgium, Denmark or Austria, reluctant to give more scope to this type of technology.
On the one hand, France wanted what it finally achieved, that the long-term contracts also go to its existing plants, because otherwise it feared that its nuclear fleet would be put at risk. For its part, Germany had insisted on the implications it could have for the energy transition and that an excessive advantage would be applied to the nuclear industry to the detriment of renewables. Furthermore, Berlin feared that the extraordinary income obtained through contracts for difference would benefit French competitiveness, to the detriment of German competitiveness. Even more so in a context like the current one, where according to the German Government’s forecasts the country will close 2023 in recession.
After yesterday’s pact, negotiations will begin with the European Parliament this Thursday to close an agreement before the end of the year. The negotiator of the European Parliament, the Spanish socialist Nicolás González Casares, assures that this is the objective. “The most important thing is to have it this legislature,” he declared to this newspaper. “We knew that the presence of Teresa Ribera could unblock some of the bitter positions,” he summarized.
