Energy companies fear excessive government power in Europe

“Member states may…”.

Oliver Thansan
Oliver Thansan
24 May 2023 Wednesday 22:38
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Energy companies fear excessive government power in Europe

“Member states may…”. This phrase is repeated almost a dozen times among the 180 amendments with which the deputy of the European socialist party Nicolás González Casares has the energy sector in Spain in suspense.

The Spanish speaker defended on Tuesday in the European Parliament social reforms such as protecting vulnerable groups from supply cuts, or the controversial cap on the so-called benefits from heaven for inframarginal technologies (those that in the market offer cheaper prices than those of the market to be able to sell all its production for being free of CO2 emissions).

With more support for the first measure from a greater number of political groups and great disagreement with the second, what is really worrying in the sector are not the reforms that the European Union could define for all countries.

The main risk that can be seen, at least from the Spanish energy sector, "is the discretion that the main speaker's proposal introduces to give power to the member states in the most strategic points of the reform, such as the cap on the benefits of the inframarginal energies, the regulation of contracts for differences for the sale of energy or the regulation of PPAs (sale contracts at fixed prices)”, affirm various sources consulted in the sector.

González Casares' proposal empowers the states so that this new regulation can be applied to already existing contracts if they consider it so; define who can access a PPA; also establish regulated prices for storage; define crisis situations based on their criteria, and establish energy mix, among other measures.

“In a normal situation this should not worry much. The problem is the times. Now there is a great rush to close the negotiation before the end of the legislature and there is a risk that the European Commission may agree to go the fastest way and move forward with the text of the Spanish rapporteur that puts market unity at risk ”, assure from the sector.

That path would be to accept that each country had a wide margin of decision in the regulation that would break the price signals of the market. "It would be the complete breakdown of the single European energy market and a way to scare away investors in the long term," say the most staunch critics of the measure.

“Leaving the states to decide may have its logic since the energy structure is very different. The problem is that there is a risk that a State will go too far in incentivising, for example, aid for renewables and we will find ourselves facing excess capacity whose cost the taxpayers end up paying for”, point out other sources in the sector more in favor of that the decision to set national limits and criteria would remain in the hands of a group of experts.

To the 186 amendments by González Casares are added those that other political groups are already contributing, so the European Parliament must work at a forced march to have a joint text on time with which to demonstrate its ability to function also in exceptional times.

Throughout the crisis they have been removed from strategic decisions so as not to delay the implementation of measures. "So now they are under pressure to comply and have a final document before the end of June," explain European sources. A rush that worries the big electric companies a lot.