EU Ditches Idea To Cap Power Firms’ Revenues

Authored by Tsvetana Paraskova via OilPrice.com,

An idea to cap the revenues of electricity generators in case energy prices surge again failed to win support at the European Parliament’s Industry, Research, and Energy Committee on Wednesday as the committee agreed on texts to reform the EU’s electricity market.

In their amendments to the draft legislation, MEPs from the committee supported proposals to make the EU’s electricity market more stable, affordable, and sustainable, but did not include an earlier idea to cap the revenues of electricity generators.

In May, Nicolas Gonzalez Casares—the European Parliament’s lead negotiator on the reform proposed by the European Commission earlier this year – proposed that the reform of the EU’s electricity market cap the extraordinary profits that power-generating companies reap when energy prices spike in a crisis. A cap that would have recovered 90% of any revenue over $202 (180 euros) per megawatt-hour (MWh). The cap would have included producers of electricity from wind, solar, and nuclear power, as well as coal.

However, the European Parliament’s energy committee didn’t support this proposal.

The industry has strongly opposed such ideas. Following today’s vote at the Parliament’s committee, Naomi Chevillard, Head of Regulatory Affairs at SolarPower Europe, said,

“Today we breathe a sigh of relief as MEPs have decided to not make market revenue caps a structural feature of the electricity market.”

“They have recognised the hugely negative impact of the caps on renewable energy growth – resulting in a contraction of the Power Purchase Agreements (PPA) market by 21% in 2022 due to regulatory uncertainty,” Chevillard added.

Earlier this month, the European Parliament reached a broad agreement on the proposed electricity market reform, designed to prevent a repeat of last year’s energy crisis. 

The proposal has now passed to the Council and the European Parliament for debate and negotiation, with the market reform expected to be voted on later this year. The European Parliament is set to vote on the reform in September, before final negotiations with EU member states in the autumn.