LUXEMBOURG, Oct 17 (Reuters) – Spain’s energy minister said on Tuesday that energy ministers from EU countries have reached a deal to reform electricity market subsidies, bringing closer ties between France and Germany on the future competitiveness of industrial sectors. The deadlock has reduced.
The European Commission proposed changes to the EU electricity market in March as EU electricity prices hit record levels last year after Russian gas supplies were cut off following the invasion of Ukraine.
The new rules seek to shift consumers to long-term, fixed-price contracts to protect them from volatile energy markets. They also aimed to improve the investment climate for new renewable energy projects and in turn improve the bloc’s energy security.
The deal struck Tuesday focuses on a section of the law that outlines how state aid can be used to support power projects. Talks had been stalled for months over concerns, particularly from Germany, that the plan could distort competition and favor France, which has the world’s second-largest nuclear fleet after the US.
“This will help protect consumers from future emergencies and future crises. The most important factor is that there was almost unanimity,” Spain’s Energy Minister Teresa Ribera told reporters. Only Hungary was absent.
A compromise proposal by Spain, which holds the EU’s rotating presidency and chaired Tuesday’s meeting, said future state aid for new renewable and nuclear power plants should be based on the price set for energy “in the margin.” The contract should take the form of subsidy.
These contracts guarantee a minimum price for energy produced, but also allow governments to recover additional revenues if prices exceed a set threshold.
However, a preamble was added to the law stating that governments could use such contracts for existing power plants when significant investments are made to increase the plant’s capacity or extend its life.
The preamble was a concession to France which wanted to be able to impose new rules on its existing nuclear plants, which produce 70% of its electricity.
But pointing to Germany, the proposals said subsidies should be designed such that the use of the revenues raised, such as support for local industries, does not distort competition or trade in the EU.
Berlin feared that France’s nuclear fleet would allow the country to offer fixed-price electricity contracts for its aging nuclear power fleet – then spend the revenue generated from these government-backed contracts on subsidized industries.
“Despite enormous stress, we managed to do it together,” Germany’s Environment and Economy Minister Robert Habach said in a statement.
“With the new electricity market design… consumers will particularly benefit from the cheaper production costs of non-fossil fuel energy. This is also important to ensure the transition to competitive prices in Europe.”
Germany, Europe’s largest economy, is on the brink of recession after losing access to substantial supplies of cheap Russian gas it received before Moscow invaded Ukraine last year.
The French president said, “The situation was very delicate for European consumers because… the price of gas as a whole determined the price of electricity without taking into account real production costs.”
The agreement reached on Tuesday represents “a major victory for France”, as its citizens will benefit from the competitive costs arising from nuclear power.
Reporting by Julia Payne, Kate Abnett, Benjamin Mallet in Paris and Marcus Wackett in Frankfurt; Editing by Barbara Lewis, Sylvia Aloisi and David Gregorio
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