Nuclear, windfall profits in focus as EU electricity reform talks near finishing line

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Financing for nuclear and the redistribution of potential windfall profits made by electricity operators is coming under close scrutiny as EU legislators prepare for talks on Thursday (16 November) to reform the bloc’s electricity market.

Read the original French article here.

Following months of tense negotiations, EU countries hammered down a joint position in mid-October on a proposed reform of the EU electricity market.

Tabled in mid-March, the proposal aimed at taming volatile electricity prices by offering energy producers the possibility of concluding a wider range of long-term contracts with consumers.

The European Commission, the European Parliament, and the Council have since begun three-way talks with a view to reaching a final deal before the end of the year.

Ahead of the next trilogue, scheduled for Thursday (16 November), negotiators have already outlined provisional deals on 16 “technical” articles in the directive, explained Nicolas González Casares, a Spanish socialist lawmaker who is the European Parliament’s speaker on the proposal.

On these, “the positions of the two institutions [Council and Parliament] are less divergent,” Casares told Euractiv.

The November trilogues will therefore serve to “validate agreements on these issues” before “tackling the most sensitive issues when the time comes”, he explained.

CfDs for nuclear

In principle, all three institutions agree to have so-called “contracts for difference” (CfDs) to cover existing or future decarbonised electricity production assets, although Parliament objects to the current phrasing of the proposal – contained in Article 19b of the draft regulation.

The article, agreed by EU countries in October, states that two-way CfDs are mandatory for state aid to extend the lifetime of existing power plants.

CfDs allow governments to compensate electricity producers when the selling price of electricity falls below a set threshold and to compensate consumers when prices go above.

Crucially, the mechanism would allow France to subsidise its existing fleet of 56 nuclear power plants when electricity prices are low – a topic recognised as “sensitive” by officials in the office of French Energy Transition Minister Agnès Pannier-Runacher.

Similarly, a mechanism tailor-made for Poland would allow Warsaw to extend subsidies to coal-fired power plants in order to deal with the power shortages caused by the war in neighbouring Ukraine, and ensure “resource adequacy, in particular during the transition towards a carbon-free system”.

Both Spanish Energy Minister Teresa Ribera, who chaired the negotiations between member states, and EU Energy Commissioner Kadri Simson said it would be “unreasonable to reopen Article 19b” because “a lot of ink has already been spilled on this subject,” said Pannier-Runacher’s entourage.

Parliament takes a stand

However, the European Parliament is opposed to Article 19b as drafted by the member states.

“We will not accept the shortcomings of France’s obsolete nuclear reactors and Poland’s polluting coal-fired power plants. They are remnants of the past,” Michael Bloss, German MEP and head of the Greens/EFA group on the issue, told Euractiv France.

When it comes to nuclear power and coal, “the position of the European Parliament and the general approach [of the EU Council] are still far apart,” a European diplomat confirmed.

As far as coal is concerned, the position of member states is to allow unused coal-fired power stations to be paid for if their use is essential for the security of supply, particularly in countries still heavily dependent on this energy source, such as Poland.

For Bloss, however, “the Council cannot expect us to remain silent […] We will make it our priority to change […] [the Council’s] totally incoherent position”.

On nuclear power, the Green MEP also points to the potential market-distorting effects of guaranteeing the sale price of existing nuclear plants.

“The European Parliament will not tolerate an unfair system in which France massively subsidises its nuclear fleet and undermines a level playing field in Europe,” insisted Bloss.

He believes that the possibility offered by a CfD to set a threshold price for electricity sales could, therefore, represent an unfair advantage for the French nuclear industry.

“It is very important to maintain a level playing field”, Bloss told Euractiv, especially for EU countries such as Germany, Luxembourg, Italy and Spain, which are reluctant to accept the possibility of CfDs for existing nuclear plants.

Nuclear backers, on the other hand, say that excluding CfDs for existing nuclear plants would jeopardise the EU’s security of supply. A significant number of MEPs – almost 190 – even voted against the Parliament’s position adopted in July.

Redistribution of revenues

Rather than subsidising electricity producers, Bloss favours the idea of redistributing revenues to consumers.

“The redistribution must be from high profits to citizens, not from citizens to the nuclear industry,” he continued. In other words, Bloss prefers the possibility of a cap attached to a CfD rather than a floor.

Member states, for their part, have not opposed any particular system.

In any case, as far as consumer protection is concerned, Pannier-Runacher’s office wants to work “by capitalising on the work of Parliament” – a hint that there may be more consensus than initially thought, particularly on the conditions for redistributing revenues to consumers, be they industrial or private.

“We have all the green solutions we need right in front of us. What we lack is the political will to implement these solutions in time,” said Morten Petersen, a Danish lawmaker who is vice-chair of the Parliament’s committee on industry, research and energy (ITRE).

Meanwhile, pressure is mounting on all sides to speed up the negotiations.