income limit
The European Commission did not back the Spanish proposal to reform the electricity market, which called for a regulated price for nuclear and hydro plants. Brussels argued that such a move would create regulatory uncertainty and scare off new investment. This stance emerged from discussions within the European community and reflects a broader debate over how to balance price stability with market incentives. (attribution: European Commission briefings and member-state discussions)
Brussels unveiled its market renewal plan on Tuesday. The proposal keeps the marginal pricing framework favored by most of Europe and aims to reduce bilateral contracts between generators and energy consumers, often referred to as PPAs. It also contemplates regulating prices for new renewable investments alongside nuclear power. (attribution: EU policy documents and briefings)
The approach aligns with the instruments supported by major European energy companies and mirrors the strategy Spain has endorsed. A notable difference arises from the Ministry for the Ecological Transition, which argues that Brussels would extend regulated prices to already installed nuclear and hydro facilities while reserving such measures for new investments. Advocates in the policy circle contend that regulated contracts can lower consumer prices quickly in a context of high electricity prices and provide manufacturers with regulatory certainty. (attribution: statements from the Ministry and EU negotiators)
In the official documents attached to the package, the main advantage of regulated prices, when designed properly, is described as income protection for generators, a cap on excess profits amid high market prices, and a potential reduction in consumer bills. The plan, however, does not propose extending this to existing facilities retroactively, a point that could raise regulatory uncertainty and dampen investor confidence. (attribution: European Commission documents and member-state analyses)
Investors face hurdles when member states seriously discuss such measures. The documents emphasize that the ability of investors to forecast income is crucial, and that the perception of policy stability matters for investment risk and the cost of capital. If anticipated, those risks could slow the pace of the energy transition and affect pricing in the long run. During the consultation period, concerns about high legal risk linked to locking in capacity at elevated price levels and the potential budget impact for member states were repeatedly raised. (attribution: European Commission consultation materials)
Industry groups representing large European electricity companies, such as Eurelectric, have highlighted a preference for market-based solutions. They have criticized the emphasis on a Spanish approach, arguing that it could hinder a competitive and efficient European energy market. (attribution: Eurelectric position papers)
income limit
Brussels also proposed an upper income cap for nuclear and hydro power plants, a response to the crisis triggered by the war in Ukraine. Both the Commission and the Spanish government argued that this sector benefited from windfall profits as gas prices surged. The aim is to protect consumers during energy crises, but the Commission warns that making such caps permanent could introduce unnecessary risks, depress forward markets, and hamper future investments. (attribution: European Commission analyses and Spanish government statements)
A price ceiling is part of the current discussion. The Commission had set a ceiling at €180 per megawatt-hour for certain technologies ending on 30 June 2023, with a decision on extension expected by 30 April 2023 to assess revenue and its effects on consumers. Spain maintained a lower ceiling of €67 per megawatt-hour, extended through the end of the year. Industry leaders have noted that such limits can squeeze profits, with Endesa reporting a significant impact on profit due to government caps. (attribution: EU market interventions and company statements)