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

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

The measure must 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 shops, 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 might be quickly applied to supply on the spot reduction throughout the economic 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 might be placing households and firms below 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 predicted to unveil additional particulars on options to sort out the worsening vitality disaster.

“The skyrocketing electrical energy costs at the moment are exposing, for various causes, the constraints of our present electrical energy market design,” von der Leyen mentioned on Monday.

“[The market] was developed below fully totally different circumstances and for fully totally different functions. It’s not match for goal.”

Marginal pricing below scrutiny

In her public assertion, von der Leyen appeared to discuss with the mannequin of marginal pricing that at present governs the liberalised electrical energy market.

Underneath 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 cost effective sources – the renewables – and finishes with the most costly ones – on this case, gasoline.

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

The system was initially praised for reinforcing 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 large, has put traders on edge, resulting in rampant hypothesis and record-breaking costs.

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

The doc drafted by her government rejects extra drastic concepts, comparable to 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 earnings below the market design decided by gasoline.

The distinction between the ultimate electrical energy worth and the agreed-upon cap would represent a supply of additional revenues for governments. The funds might then be become direct earnings help for the worst-hit households and firms.

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

The manager additionally dismisses the potential of making use of the Iberian mannequin – a subsidised cap on gasoline costs – to the complete EU market, fearing it might incentivise a better consumption of gasoline throughout the bloc.

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