The European Parliament’s committee responsible for energy called for improving electricity consumers’ right to long-term, affordable and stable prices and to mitigate the impact of sudden price shocks. The RE-Source platform of corporate renewable energy buyers and suppliers said the position encourages more investment in renewables and reinforces the importance of renewable power purchase agreements.
The reform of the electricity market in the European Union, aimed at making it more stable, affordable and sustainable, received the support of the Industry, Research and Energy Committee, the European Parliament said. In their amendments to the draft legislation, lawmakers proposed to further strengthen consumer protection against volatile prices.
Consumers should have the right to fixed-price contracts, dynamic price contracts, as well as more key information on the options they sign up to, banning suppliers from being able to unilaterally change the terms of a contract, the statement adds. The aim is to ensure that all consumers, as well as small businesses, would benefit from the right to long-term, affordable and stable prices and that the impact of sudden price shocks is mitigated, according to the initiative.
The most expensive energy source, usually fossil fuel, still drives the overall electricity price
Energy prices have been rising since mid-2021, initially in the context of the post-COVID-19 economic recovery. Gas supply issues since Russia’s invasion of Ukraine in February 2022 accelerated the increase and unleashed an energy crisis. High gas prices had an immediate effect on electricity prices, as they are linked together under the merit order system, where the most expensive energy source (usually fossil fuel) sets the overall electricity price.
MEPs also advocate that EU countries prohibit suppliers from cutting the electricity supply of vulnerable customers, including during disputes between suppliers and customers, and prevent suppliers from requiring these customers to use prepayment systems.
Special contracts and flexibility
The energy committee backed wider use of contracts for difference to encourage energy investments and suggest leaving the door open for equivalent support schemes after approval by the European Commission. In a CfD, a public authority compensates the energy producer if market prices fall too steeply, but collects payments from them if prices are too high, relative to the agreed price, usually won at an auction.
The MEPs highlighted the importance of power purchase agreements (PPAs) in providing consumers with stable prices and renewable energy providers with reliable revenues. The European Commission is tasked with setting up a marketplace for PPAs by the end of 2024.
Renewables, home batteries can ease electricity price volatility
The panel also advocates in favor of non-fossil flexibility – the ability of the power grid to adjust to changes in supply and demand without relying on fossil fuels – and flexibility on the demand side, for instance via the use of home battery systems. This can help balance the electricity grid, reduce price fluctuations, and empower consumers to adapt their energy consumption to prices and their needs, lawmakers pointed out.
“With this agreement, parliament puts citizens at the centre of the design of the electricity market, prohibiting companies from cutting the power of vulnerable and at-risk consumers, promoting the right to share energy, reducing price spikes and promoting affordable prices for citizens and companies. We turned CfDs into the reference system for encouraging the electricity sector to transition towards a renewable-based zero-emission system”, lead MEP Nicolás González Casares said.
PPAs to fund energy transition in Europe
RE-Source, a platform of corporate renewable energy buyers and suppliers, welcomed the compromise agreement on electricity market design reform. In its view, the move encourages investment in renewable energy and it will reinforce the importance of PPAs for renewables, as a significant tool for funding the energy transition in Europe.
The committee enabled a swift adoption of the file by the end of the year, RE-Source pointed out. The agreement requires member states to assess the regulatory and administrative procedures and remove unjustified barriers to renewables PPAs in their national energy and climate plans, the statement reads.
For energy-intensive consumers, the possibility to sign PPAs requires a stable and predictable environment
The committee’s vote was a first step toward helping corporate buyers secure a competitive power price while driving investments in new renewables, said Nick Bitsios, the representative of Greece-based Mytilineos in Brussels. He underscored that for his company and other energy-intensive consumers, the possibility to sign PPAs requires a stable and predictable environment. For this reason, it is important that the lawmakers didn’t propose to institutionalize emergency measures, Bitsios pointed out.
The European Parliament needs to back the committee’s position in a plenary session to begin negotiations with the Council of the EU and the European Commission.