EU won't extend renewables revenue cap

2023-06-15

The European Commission has said it is neither necessary nor advisable to extend the emergency measures that were put in place at the end of 2022 for the energy market. This means that the €0.18/kWh price cap on solar and other renewables will no longer apply in most member states from 30 June.

Image: EC - Audiovisual Service/ Jennifer Jacquemart

The European Commission will not extend the revenue cap that was put in place in September 2022 for infra-marginal technologies, such as PV and wind. In a reporton emergency interventions aimed at mitigating the rise in energy prices, the Commission concludes that "an extension of these measures does not seem to be necessary or advisable at the present time", "the supply and prices of electricity market in the EU having evolved considerably since the record levels recorded last year”. The report says measures to reduce demand for electricity, caps on inframarginal revenues and rules for setting retail prices "helped calm European energy markets, alongside other emergency proposals adopted in 2022 . »

Set at €0.18/kWh, the inframarginal revenue cap on renewable energies, nuclear and lignite, has been in place since December 2022 in most Member States. It will remain in force until June 30, 2023, with the exception of Austria, the Czech Republic, Finland, France, Luxembourg, Poland, Portugal, Slovenia and Spain, where it will apply until 31 December 2023.

In Cyprus, it is the regulatory body that will decide on the end of this measure. In Slovakia, this will remain in force until December 31, 2024. In Germany, the period of application may be extended until April 30, 2024. According to the report, the country has not yet taken a decision on this. matter.

According to the Commission, the introduction of the cap on inframarginal revenues has been done in a heterogeneous way . The results of a public consultation on a possible extension show that most respondents are opposed to it. They argue that the heterogeneity of the set-up had created uncertainty for investors and discouraged new investments. In addition, the measures were difficult to enforce and had high administrative costs compared to the benefits provided.

The Commission has indicated that it has only a limited amount of data to take stock of the revenues generated by the cap. Bulgaria raised €163 million in December 2022, while Lithuania had raised around €10 million as of March 9, 2023. It was originally estimated that revenue from the cap would amount to more than €10 million. 50 billion euros.

“However, at the time of writing this report, it seems unlikely that these estimates will materialize,” the Commission continues.

In addition to the fear that the emergency measures will have repercussions on existing power purchase agreements (PPAs), the disincentive they represent for new PPAs is a major factor in the decision not to extend the cap. recipes. In particular, the report points to situations where the cap applies to fictitious revenues based on wholesale electricity prices, which could force producers to sell at a loss.

"A possible extension of the measure would hinder one of the objectives set out in the proposal for the organization of the electricity market: to encourage the recovery of PPAs and to ensure that the PPA market is as liquid as possible", concludes the Commission.

Translation provided by Christelle Taureau.

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