Almost a year ago, when electricity prices were at their highest and the energy crisis was wreaking havoc across Europe, the president of the European Commission, Ursula von der Leyen, promised to reform the electricity market. It was not as ambitious as expected, but nine months after the proposal was presented, an agreement has been reached that aims to provide more stability to prices, alleviate future crises and offer more aid to vulnerable consumers. The new system, which must be ratified by the states and the Parliament, should enter into force next year.
It is not the major weight reform that countries like Spain were looking for, but it is possible to give more certainty in the face of a market as volatile as the electricity one and renewable energies will be prioritized above all. The negotiators of the Parliament and the European Council had different positions, but there were points in common. The protection of the most vulnerable consumers was a point where the two sides converged. In the event of a price crisis like the one in the summer of 2022, when they reached more than 300 euros per megawatt hour, a mechanism will be activated by which countries will be able to apply a series of measures to ease prices for the most vulnerable customers and any electricity cuts to those suffering from energy poverty will be prohibited, although it will be with conditions.
Consumers will have the right to fixed price or variable price contracts and will be able to demand more information about the options they contract. More guarantees for citizens who often do not understand their electricity bills. A factor that was very important for Parliament, as recalled by the Spanish socialist negotiator, Nicolás González Casares, who admitted the importance of reaching an agreement. “Reaching agreements implies achievements, but also resignations everywhere”, he assured.
Those known as contracts for difference were one of the issues that caused the most disagreements. In these contracts, the State compensates the energy producer if market prices fall below an agreed threshold, but they receive income if prices exceed it. In practice it becomes a subsidy. In this way, the generator always receives stable income for the electricity it produces and price volatility is reduced.
The institutions agreed that these contracts can be used both in new investments in renewable energies and in nuclear, also in existing plants, as the countries demanded, at the request of France. But they will not be applied automatically, but must have the endorsement of the European Commission, which has undertaken to ensure that there are no distortions in the markets and will ensure this within the framework of State aid, as well which is currently being done. Also, the benefits achieved thanks to the contracts for difference will have more flexibility and the states will be able to decide whether they go to the final consumers, or to reduce the costs of electricity.
