EU Reaches Tentative Agreement to Overhaul Electricity Market

(Bloomberg) -- The European Union agreed on an overhaul of the bloc’s power market to accelerate the rollout of renewables and curb volatility in electricity prices during the energy transition. 

The tentative deal between representatives of the European Parliament and member states in the EU Council would enable state support for existing nuclear facilities using so-called contracts for difference to help provide price certainty for generators. It would also pave the way for coal-fired plants to receive subsidies to provide backup power during the move to clean sources.

“Thanks to this agreement, we will be able to stabilize long-term markets, speed up the deployment of renewable and fossil-free energy sources, offer more affordable electricity to the EU’s citizens and enhance industrial competitiveness,” said Spanish Environmental Transition Minister Teresa Ribera, whose country holds the rotating EU presidency.

The proposed law, put forth after Russia’s invasion of Ukraine upended the EU’s natural gas and power markets, will also reinforce measures to protect the most vulnerable consumers and give member states the power to declare a crisis. The deal needs to be endorsed by EU ministers and the parliament’s plenary to take effect.

The rules for contracts for difference — an issue that in early negotiations divided France and Germany — will apply after a transition period of three years, following a law to ensure legal certainty for ongoing projects, the EU Council said in a statement on Thursday. Revenues would be channeled to consumers and could also be used to finance investments to cut power costs or fund direct price-support measures. 

“The result is balanced and the reform represents a significant step forward, offering investors much-needed certainty through long-term contracts while ensuring consumer protection via more stable electricity prices,” said Kristian Ruby, secretary general of the European power-sector association Eurelectric.

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