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European Commission Proposes Capping Revenues of Infra-marginal Producers at €180/Mwh Across EU

European Commission Proposes Capping Revenues of Infra-marginal Producers at €180/Mwh Across EU
  • EC has proposed emergency intervention measures to help European Union deal with elevated energy prices and limited supply
  • It includes capping revenues for infra-marginal electricity producers as renewables at €180 per MWh
  • It will allow producers to secure exceptional revenues at stable costs and excess revenues will be collected to support consumers lower their bills

In a bid to tame skyrocketing energy prices, the European Commission (EC) has proposed a series of emergency measures, including temporarily capping revenues for producers of lower cost power generation technologies as renewables, nuclear energy and lignite among others, at €180 per MWh.

Revenues generated above the cap will be collected by the member states and channeled to support consumers reduce their bills, it stated while tabling the emergency intervention proposal in Strasbourg.

The EC identified renewables, nuclear and lignite as ‘infra-marginal’ electricity producers, compared to expensive marginal producers as oil and gas generators. Infra-marginal producers provide electricity to the grid at a cost below the price level set by the more expensive marginal producers which drives up wholesale prices. Infra-marginal producers have been making ‘exceptional revenues, with relatively stable operational costs’.

“We are proposing to set a limit at EU level for the remuneration of the infra-marginal electricity technologies. Today, gas – or sometimes coal – usually sets the final price for wholesale electricity. A company that produces electricity with lower costs will benefit massively from this, resulting in excessive revenues,” explained EC’s Executive Vice-President Frans Timmermans. “At the same time, consumers do not get the benefit in their bills of the growing share of renewables.”

Capping the revenues will allow producers to ‘exceptional revenues, with relatively stable operational costs without impairing investment in new capacities’ in line with 2030 and 2050 objectives.

The commission will also encourage member states to trade electricity vis bilateral agreements to share part of the infra-marginal revenues for the benefit of end users in the member state with low electricity generation, in a ‘spirit of solidarity’. Such agreements need to be signed by December 1, 2022.

Member states will also be encouraged to finance cross-border projects in line with the REPowerEU objectives.

Additionally, the commission wants its member states to control their electricity consumption during peak hours to reduce prices across the bloc thereby reduce the risk of blackouts or rationing.

“The era of cheap fossil fuels is over and the faster we move to cheap, clean, and home-grown renewables, the sooner we will be immune to Russia’s energy blackmail and anybody else who may think they can blackmail us with energy,” added Timmermans while cautioning that the next winters ‘not just this one’ will be difficult as there is no quick fix to the elevated energy price and limited supply scenario.

Details of the measures proposed by the EC are available on its website.

On Sept. 9, SolarPower Europe, the association of the European solar power sector, had emphasized, that “the only structural way-out of the crisis is to increase renewable energies, which are the energy insurance of Europe. And  these investment decisions need to be taken now and require stable and predictable regulatory frameworks.”

It had asked “measures on windfall revenues of power generators should target actual profits only and exempt renewables that do not make windfall profits.” The rationale was that most solar farms are not earning the wholesale electricity price, but get a fixed price for the electricity they produce either from a government-backed support scheme or a Power Purchase Agreement (PPA) with an industrial consumer, and therefore should not be subject to windfall measures.” In fact, it said, that preliminary estimates from Germany suggest that around two-thirds of solar PV electricity is not making windfall profits. Companies exporting gas to Europe, on the other hand, are reporting historically high profits and should also be called on to contribute, it said.

Source from Taiyang News

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