The European Commission is looking to decouple electricity prices from gas prices by setting up a system of tenders and long-term contracts for producers of renewable and nuclear energy, according to a working document seen by POLITICO’s Brussels Playbook.
The document, or non-paper, will be discussed at a meeting of EU energy ministers on Tuesday in Luxembourg. The tender-based scheme is proposed as an alternative to the price cap for gas used to produce electricity, which has been tested in Spain and Portugal since the summer.
Under the proposed reform, countries would secure long-term “contracts for difference” with producers of renewable or nuclear energy to lock in cheap prices for consumers over long periods, typically 15 years. The contracts would be awarded via tendering, with the cheapest offer winning the bid.
The price of these contracts “will be a direct function of the actual production costs of the relevant technologies,” the document says.
In the text, Brussels voices its opposition to an EU-wide rollout of the “Iberian” price cap used in Spain and Portugal, which subsidizes electricity made from gas via a power levy on certain consumers. Among the negatives, the Commission mentioned the need to prevent subsidized electricity from going to the U.K. and Switzerland, the risk of boosting consumption of natural gas, and the fact that it would benefit some member countries disproportionately.
France, which typically sells renewable and nuclear energy, and buys electricity made from gas from Germany, would be “the biggest beneficiary” of the Iberian scheme, the Commission wrote. France has been in favor of extending it to the rest of the EU.
“The paper is a bit like a Rorschach test,” one EU diplomat told Brussels Playbook. “Every member state will read what they want, depending on their emotional disposition.”
