Jan 26, 2023
EU Power Lobby Warns Spain’s Proposed Market Changes Risk Higher Costs
(Bloomberg) -- The European Union’s electricity sector warned against Spain’s reform plan for the region’s power market, arguing it risks further increasing costs for consumers.
Eurelectric, comprised of 3,500 power sector companies, said in a letter to EU energy commissioner Kadri Simson that Spain’s proposal — which involves boosting long-term renewable deals — would lower competition and force households to pay for inefficiencies.
It also risks splintering the bloc’s internal energy market that has existed for more than two decades, the lobby group said, as it could put national regulators in charge of securing the energy mix.
Eurelectric’s stance highlights the sensitivity of Europe’s upcoming electricity market reform, which has been heightened due to high energy prices battering consumers and businesses since Russia’s invasion of Ukraine.
The bloc’s executive branch kicked off a public consultation on its reform this week, which it plans to propose in March.
“The uncertainty associated with the new market design will delay investments in the short term, which are critical to reduce gas dependency and mitigate the current crisis,” said the letter.
The EU’s member states are divided between those who want a deep reform — decoupling the price of gas from electricity — and those who want small tweaks.
The lobby said that the design should retain its so-called marginal pricing model, which sets the cost of electricity according to the most expensive fuel needed to generate it. They added that some measures could complement the existing design, such as a “market-compatible” investment framework to boost renewables.
The EU wants to ensure that the market keeps prices affordable, while also encouraging investment in renewables. Spain had suggested boosting the use of so-called “contracts for difference” which involve setting a price for electricity produced over a fixed period. Eurelectic favors so-called power purchase agreements, which are deals struck between a utility and an electricity producer.
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