Power Price Subsidies Spark Tensions In EU Market Reform Talks

The European Union member states are weighing the possibility to scrap a part of the electricity market reform due to disagreements over proposed fixed-price subsidies for power contracts, Reuters reported on Monday, quoting a draft compromise on the issue.  

The EU is seeking to reform the way its electricity market works to avoid a repeat of last year’s energy crisis which hit households and industries with soaring power prices.        

But a part of the reform concerning state aid to power producers in the form of fixed-price contracts could be scrapped altogether due to disagreements between Germany and France – the biggest EU economies – on how extra revenues generated by these contracts would be spent. France is seeking to subsidize its large nuclear power generators, while Germany and other EU members are against, saying such subsidies would distort competition and be of advantage to the French power producers.  

The draft compromise seen by Reuters includes three proposals to address the issue, including a proposal to scrap these rules in a first such suggestion since the EU countries started debating the power market reform. 

The European Commission in March presented a proposal to revise the rules for electricity market design and for improving the EU protection against market manipulation in the wholesale energy market. 

The Commission says that the market reform is aimed at making the EU energy market more resilient and making the energy bills of European consumers and companies more independent from the short-term market price of electricity. The EU’s new electricity market design would accelerate a surge in renewables and the phase-out of gas, make consumer bills less dependent on volatile fossil fuel prices, better protect consumers from future price spikes and potential market manipulation, and make the EU’s industry clean and more competitive, the Commission says. 

The market reform is expected to be voted on later this year, while the EU energy ministers will meet on October 17 to try to reach a deal on the reform among the member states.    

By Josh Owens for Oilprice.com

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