Germany’s Economy Minister Robert Habeck signaled that he supports Spain’s proposal for reforming Europe’s electricity market, which aims to disentangle the cost of renewable power from gas prices.
(Bloomberg) — Germany’s Economy Minister Robert Habeck signaled that he supports Spain’s proposal for reforming Europe’s electricity market, which aims to disentangle the cost of renewable power from gas prices.
“Spain has made a very interesting proposal,” Habeck said at a Handelsblatt conference in Berlin on Monday, adding that it offers a good basis for discussion. The European Commission is in the process of redesigning the bloc’s power market in the wake of Russia’s invasion of Ukraine, which caused gas and electricity costs to soar.
Europe’s current mechanism for pricing power is closely linked to the most expensive form of production, typically a gas generator. The approach unveiled by Spanish policy makers last week seeks to prevent cheaper sources of energy — like solar and wind farms — from benefiting from higher prices linked to gas.
Spain’s plan aims to use so-called contracts for difference — long-term agreements that set a price for electricity produced over a fixed period — to set a separate price for renewable power. That could also help boost security for investments, officials said when they presented the proposal.
It also seeks to create a capacity market for fossil-fuel-fired plants, which compensates power producers for their availability, rather than for actual electricity, to encourage security of supply.
The EU’s executive branch must reach a political deal by the summer to ensure it’s ready to withstand further energy turmoil next winter, Pascal Canfin, chair of the parliament’s environment committee, told reporters earlier. The commission is due to table a proposal in March.
Spain’s Economy Minister Nadia Calviño, speaking at the same event as Habeck on Monday, said her country’s aim was to “kickstart” a debate around possible reforms, adding that “reducing or containing volatility of energy prices to try to have as low an energy price as possible is good for Europe.”
–With assistance from John Ainger.
(Updates with additional details from second paragraph.)
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