EU draft reveals plans to lock in more fixed electricity prices


EU draft reveals plans to lock in more fixed electricity prices


The European Union has drafted plans to extend the use of contracts that pay power plants a fixed price for electricity, as part of its power market reform to protect European consumers from big price swings.

Last year, the European Commission committed to reform the EU's energy market rules in response to record-high gas costs driven by Russian flow cutbacks, which sent power prices surging.

The proposal, which is due to release on March 16, calls for minor adjustments to encourage countries toward more predictable, fixed-price power contracts.

Governments in the EU should use a two-way contract for difference (CfD) or an equivalent contract if they want to support new investments in renewable energy sources like wind, solar, geothermal, hydropower, and nuclear power, for example, the draft said.

The goal is to help consumers' energy bills become less variable while giving investors a steady revenue stream. Restricting this support to renewable and low-carbon electricity also aims to speed up Europe's shift away from fossil fuels.

No matter how much electricity costs in the short-term energy markets, two-way CfDs offer generators a fixed "strike price" for their production. The extra profits the generator makes should be handed out to the final electricity users, if the market price is higher than the CfD strike price, according to a draft EU document.

To protect consumers from contracts that would expose them to erratic price fluctuations in the energy markets, governments should also ensure that they have access to fixed-price electricity contracts, the draft said.

The Commission recommended allowing national governments to temporarily intervene to fix prices and provide households and small businesses a part of their electricity at a lower price if European energy prices were to surge to severe levels again.






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