The European Commission wants to limit the benefits that electricity companies can obtain from generation with inframarginal technologies (cheap ones such as renewables or nuclear) to 180 euros per MWh, as detailed in the proposal for electricity market intervention that it is processing and of which some details have been leaked. The difference with the real benefit will be dedicated to direct aid to final consumers. Countries are also asked to reduce electricity consumption by 10% so that at least half of these savings occur in periods of peak demand, which in turn will reduce the contribution of gas-fired electricity generation. , which is the element that contributes most to the exorbitant rise in prices.
The plan should have been approved at Tuesday's meeting of the College of Commissioners, but President Ursula von der Leyen decided to postpone the decision for one day. According to what is known of the draft agreement, the cap on benefits that electricity companies can obtain with renewable technologies established in those 180 euros MWh does not exclude the possibility that governments decide on their own to introduce other measures in this regard to further limit the margin of electricity companies, provided that they are not discriminatory or put your investments at risk.
The idea of this intervention in the electricity market has been on the table since the end of August and the Commission itself has doubts about finding a formula that allows it to maintain the price-setting scheme, which is based on an intense incentive for investment in renewables, with the fact that this causes the most expensive technology (gas at the moment) to set the final price of electricity. Last Friday, the energy ministers studied a first draft that did not get enough support and asked the Commission for a more concrete plan that it has to publish this week. The Commission has already warned that its scheme would have to be indicative and that in the end it will be the governments that choose the legal path to apply it, taking into account their peculiarities in the industry and the energy mix of each one.
The second part of this initiative to intervene in the electricity market is to ask all countries for a 10% reduction in electricity demand, based on data from the same period prior to the pandemic. For this, the countries must identify and define each month which are the times of the day in which the demand is highest so that they correspond to 10% of the hours of the entire month. And in those periods of time, every hour they should reduce consumption by 5%. The price setting mechanism establishes that the different technologies must come into operation based on demand in increasing order of their cost, starting with the cheapest (renewable) so that a reduction in demand at peak hours can contribute to lower prices if the use of cogeneration plants decreases.
In addition, oil, gas, coal and refining companies would also have to make a “solidarity” contribution corresponding to the extraordinary profits obtained in fiscal year 2022 so that governments can finance aid to the most vulnerable consumers. President Von der Leyen had said at the entrance of the extraordinary meeting of ministers on Friday that "all energy sources must help overcome this crisis." This proposal must be formally approved by the Commission, expected on Wednesday, and later by the governments of the member countries. That is why we do not speak of taxes but of "solidarity contribution" because decisions on taxation require the unanimity of all governments.