Following months of negotiations, the European Council (EC) has reached an agreement on a proposal to amend the European Union (EU) electricity market design. They agreed to include existing nuclear plants in the reform. The agreement could result in France dropping a scheme forcing state-controlled utility EDF to sell part of its nuclear energy production to competitors below market-level prices.
The EC stated that the reform aims to “make electricity prices less dependent on volatile fossil fuel prices, shield consumers from price spikes, accelerate the deployment of renewable energies and improve consumer protection”. The proposal is part of a wider reform of the E.U.’s electricity market design. This reform movement also includes a regulation focused on improving the E.U. protection against market manipulation through better monitoring transparency.
The EC said, “The reform aims to steady long-term electricity markets by boosting the market for power purchase agreements (PPAs) generalizing two-way contracts for difference (CfDs) and improving the liquidity of the forward market. The Council agreed that member states would promote uptake of power purchase agreements by removing unjustified barriers and disproportionate or discriminatory procedures or charges. Measures may include among other things, state-backed guarantee schemes at market prices, private guarantees, or facilities pooling demand for PPAs.”
The EC is made up of representatives of the governments of E.U. member states. They agreed that two-way contracts for difference (CfDs) would be the mandatory model used when public funding is involved in long-term contracts with some exceptions. These contracts would apply to investments in new power-generating facilities based on wind energy, solar energy, geothermal energy, hydropower without reservoir and nuclear energy.
The EC also agreed to remove the temporary nature of capacity mechanisms, support measures that member states can introduce remunerate power plants in order to guarantee medium and long-term security of electricity supply.
The European Commission adopted the proposals on the reform of the E.U.’s electricity market design on the 14th of March. But, a dispute between France and Germany over the role of nuclear power in European climate action has dominated negotiation for months.
Under the terms of the agreement, France will now be able to finance the extension of the operation of its existing fleet of nuclear reactors with two-ways CfDs. This is in line with the Commission’s initial proposal.
Currently, under the so-called Regulated Access to Incumbent Nuclear Electricity (Accès Régulé à l’Electricité Nucléaire Historique, ARENH) mechanism set up to foster competition, rival energy suppliers can buy electricity produced by EDF’s fleet of French nuclear power plants that were commissioned before the 8th of December 2010. Under this type of contract, between July 2011 and December 2025, suppliers can buy up to one hundred terawatts representing twenty five percent of EDF annual nuclear production at a fixed price of forty-seven dollars per megawatt. EDF operates fifty-seven reactors in France. The combined capacity of these reactors is about sixty-two gigawatts which is about seventy-five percent of the country’s electricity,
Under the agreement reached by the EC, the ARENH mechanism could be replaced by CfDs with it expires at the end of 2025. The current agreement has resulted in lost earnings for EDF.
The EC’s agreement will serve as a mandate for negotiations with the European Parliament on the final shape of the legislation. The outcome of the negotiations will have to be formally adopted by the EC and the Parliament.