France Backs Spain’s Proposal to Revamp EU Power Market Pricing

(Bloomberg) -- France has joined Spain’s call to overhaul the mechanism used by the European Union to price electricity, as the two countries plan a united front over a crucial reform of the market due in the coming months.

France supports a greater use of instruments similar to so-called contracts for difference, long-term deals that set a price for power produced by renewables, according to a paper seen by Bloomberg, a position which mirrors the one outlined by Spain in a similar paper. The country is also proposing a mechanism in line with the emergency windfall tax on low-cost producers agreed last year that would help cushion consumers from high costs of energy.

The release of the French proposal comes just ahead of a meeting between President Emmanuel Macron and Spanish Prime Minister Pedro Sanchez Thursday, when the two leaders are expected to discuss how to present a united front on the plan.

The issue will be the central part of the discussion between the leaders in Barcelona this week, according to government officials, with France set to advocate that the Iberian mechanism can also be successfully extended to other countries.

The European Commission is aiming to propose a reform of its electricity market in March following a consultation due later this month. 

While Germany has also signaled that it is open to backing the Spanish proposal, the issue is set to be divisive among member states, especially as the long-term reform comes in the middle of an energy crisis which has seen the price of gas and electricity surge.

The EU has put in place a number of emergency measures over the last year to help weather the unprecedented price surge, including a temporary price cap on gas and new rules to spur the roll-out of renewables. 

For Spain, the reform of the power market pricing is closely linked to an extension of the Iberian gas price cap, which the region has been granted due to the specific features of its energy structure. According to Madrid, the government is planning to push both for the pricing reform and the mechanism extension simultaneously.

--With assistance from .

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