In order to avoid excessive electricity prices for consumers and companies, the EU Commission wants to promote long-term contracts. This emerges from a draft for a change in the law, which is available to the German Press Agency in Brussels.
With a larger proportion of long-term contracts, consumers could therefore increasingly benefit from more stable prices. At the same time, investments in renewable energies are to be promoted with the innovations in the EU regulation on the electricity market of the Union.
Months of discussions
In order to protect end customers from strong price fluctuations, the authors of the draft propose, among other things, a right to fixed-price contracts as well as contracts with dynamic pricing. For example, consumers could lock in safe, long-term prices or opt for dynamic price contracts with utilities if they want to take advantage of price fluctuations – for example to use electricity when it is cheaper for charging electric cars or for heat pumps, for example.
Changes in the electricity market have been discussed at EU level for months – above all because the price of electricity also depends on the price of gas. Skyrocketing gas prices as a result of the Russian war of aggression in Ukraine also caused electricity prices to soar.
However, according to the Commission’s ideas, there should not be a major reform of the electricity market with decoupling. The so-called merit order principle is not questioned in the paper. It describes the order in which the power plants that are offered on the electricity exchange operate. Power plants that can produce electricity cheaply are used first to meet demand. These are wind turbines, for example. In the end, however, the price depends on the power plant that was switched on last and is therefore the most expensive.
Targeted fixed price guarantee
According to the proposal, investments in renewable energies should also be boosted, for example with special contracts for difference and public guarantees for so-called power purchase agreements (PPAs). The latter are power purchase agreements between energy producers and commercial customers and thus offer long-term price stability and the producer the necessary security to make an investment decision.
With the contracts for difference, the EU states are supposed to guarantee electricity producers a fixed price for electricity after new investments. If a price that can be achieved on the market is lower, the state compensates for the difference in order to create price stability in the long term. If you earn more than the price specified in the contract, the surplus goes to all electricity end customers based on their consumption. This should apply to investments in all renewable energies and nuclear power.
Greens criticize nuclear power subsidies
The EU Commission has been working on a draft for the reform for months, and the final proposal is expected to be presented next week. The countries and the European Parliament must then finally negotiate the text before it can come into force.
MEP Michael Bloss (Greens) criticized the promotion of investments in nuclear power – it was “put in the nest as a cuckoo’s egg” for renewables. You get massive funding promises, although they are extremely expensive, uninsurable and not compatible with a future, flexible electricity system. The CSU MEP Markus Ferber welcomed the fact that the merit order system will be retained according to the draft. “It is reasonable that the commission uses the scalpel rather than the machete.”
