BRUSSELS (Reuters) – European Union (EU) countries are considering scrapping a central plank of its electricity market reform as France and Germany deadlock over electricity subsidies. State granted to power plants, according to a document seen by Reuters.
All 27 member states are seeking to adopt a common position on planned reform of the EU electricity market, but some countries, including Germany and France, have been at odds for months over the question of competitive advantages that regulations could potentially give to certain countries.
The question is whether governments will be able to offer state-guaranteed fixed-price electricity contracts to existing power plants, then collect the excess revenue generated by these contracts and redirect it into subsidies for industries.
France wants to provide these subsidies to its nuclear fleet, and the proposed rules are supported by Central and Eastern European countries. On the other hand, Germany and other countries strongly oppose it, believing that it could give French industries an advantage over their own.
A draft compromise, seen by Reuters, asks countries to consider three options, one of which is removing rules on such subsidies altogether as part of the reform.
The other two options in the document prepared by Spain, which holds the rotating EU presidency, would limit how countries can use revenue generated by electricity price subsidies and allow Brussels to intervene and to limit the use of these revenues by a country in the event of distortion of the EU single market.
This is the first time that EU countries have considered scrapping these rules altogether, after struggling to find a compromise.
Removing this part of the reform would not prohibit France and other countries from offering fixed-price electricity contracts to producers. On the other hand, it could complicate these contracts and make them more difficult to submit for approval in Brussels, in accordance with EU rules on state subsidies.
For a senior European diplomat, the oppositions seem “further apart than in June”, in reference to a meeting during which EU energy ministers failed to find a compromise on the law.
The European Commission’s initial reform proposal, presented in March, aimed to encourage electricity producers to enter into long-term, fixed-price contracts, so that consumers would be less exposed to gas price spikes in the short term, such as those observed last year.
To do this, Brussels has proposed that public support for new investments in nuclear and renewable energy plants take the form of state-guaranteed fixed-price electricity contracts. This is the section that countries can delete.
Ambassadors of EU countries will consider the proposal on Wednesday. Energy ministers will meet on October 17 to try to find an agreement.
(Reporting by Kate Abnett and Julia Payne; French version by Stéphanie Hamel, editing by Kate Entringer)
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