The European Parliament Committee on Industry, Research and Energy (ITRE) adopted its position on the reform of the Electricity Market Design (EMD). It also gave a mandate to the Parliament’s negotiating team to move to trialogues, allowing for a swift adoption of the file by the end of the year. The agreement encourages more investment in renewable energy and reinforces the importance of renewable power purchase agreements (PPAs) – direct contracts between corporate companies and electricity suppliers – as a significant tool for funding the energy transition in Europe.
Inefficiency of the inframarginal revenue cap
MEPs have recognised the inefficiency of the inframarginal revenue cap as a response to the crisis. The inframarginal revenue cap and a divergent implementation of the cap across member states had led to significant investor uncertainty in renewables and had a negative impact on the conclusion of PPAs and other long-term contracts. This strong message was reiterated by a coalition of energy intensives recently in a joint letter. Council must now follow suit and reject the institutionalisation of infra-marginal revenue caps.
The text will also facilitate and remove barriers to renewables PPAs which are poised to become a major drive for more renewable deployment. The agreement requires member states to assess the regulatory and administrative procedures and remove unjustified barriers to renewable PPAs in their national energy and climate plans. It will also provide guidance to corporates on reporting PPA agreements.
Driving investments in new renewables
“We strongly support the vote on the Electricity Market Design reform and its positive impact to foster the widespread use of power purchase agreements” says Annie Scanlan – Policy & Impact Director at RE-Source. “We are now looking forward to the trialogue discussions. They will have to make sure that the regulatory framework, in particular the additional reporting obligations, do not constitute new barriers for PPAs, while continuing to develop a strong regulatory environment to accelerate the deployment of renewables.”
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“The ITRE Committee vote on the reform of the Electricity Market Design is a first step towards helping corporate buyers secure a competitive power price while driving investments in new renewables” says Nick Bitsios, Head of Brussels Office at Mytilineos. “For Mytilineos, and for other energy-intensive consumers, the possibility to sign PPAs requires a stable and predictable environment. For this reason, it is important that ITRE does not propose the institutionalization of the emergency measures in the electricity market.
Eliminate the remaining barriers to PPAs
The requirement for Member States to introduce schemes that eliminate the remaining barriers to PPAs is also positive, but the wording should be broadened to cover all barriers to PPAs, including shaping. Therefore, ahead of the interinstitutional negotiations, we encourage the Council to adopt the same approach as the Parliament, while continuing to work on the specific provisions where further improvements can still be made.”
Next steps
The Council now needs to align on their own position, likely after the Summer break. This will be followed by trialogue negotiations involving the Council, European Parliament and European Commission. The EU aims to agree on the framework by the end of 2023. (hcn)
