Back in Brussels, a new proposal reshapes the electricity market reform. Spain holds the rotating presidency of the Council of the European Union, guiding a still-persistent obstacle: the Contracts for Difference. The document, shared with EL PERIÓDICO DE CATALUÑA of Grupo Prensa Ibérica, bears a close resemblance to the version circulated last July, yet it adds nuances about concessions and strengthens oversight. The core innovation lies in the proposed redistribution of income from Contracts for Difference as state aid, with early plans focusing on how such revenues return to member states. The proposal will be discussed at Coreper, the meeting of the Twenty-Seven’s permanent ambassadors, slated for Wednesday.
In optimistic terms, there is a sense that an agreement could emerge in the coming weeks, according to Teresa Ribera, the third vice president and minister for the Ecological Transition, after a Brussels gathering with European Commission vice-president Maroš Šefčovič, who coordinates the Green Deal. Still, concerns linger in two large member states about how their positions might be reflected and what consequences could ripple through their industries. The message emphasizes that the aim is not to placate just those two countries but to ensure that the interests of Europe and all Twenty-Seven are safeguarded.
Contracts for differences are a form of subsidy enabling a state to sign a long-term fixed-price electricity purchase and sale agreement with a producer. If the market price exceeds the reference price, the state pays the producer the difference; if the market price falls below the reference, the producer returns the excess to the state. EU energy ministers convened in mid-June for a first attempt to close a political agreement, but the debate has since intensified around how these subsidies redistribute income and how they should apply to existing facilities versus new investments.
Two powerful moves drive the discourse: France and Germany have pressed to widen the subsidy framework to existing facilities—an expansion not originally included by the European Commission—and to ensure that the income from these schemes can benefit consumers as well as industry. Poland has pushed to keep capacity mechanism subsidies for coal-fired plants on the table.
July’s session, chaired by Spain, produced a first draft that tempered the interests of the three states involved. For France, the draft proposed extending subsidies to current generation plants, provided they could substantially reinforce or extend their capacity or lifetime by at least ten years. For Germany, the idea was to allow income from Contracts for Difference to be recognized in a way that could complement existing support mechanisms. Poland supported opening the door to thermal power plants receiving capacity payments as well.
Now a revised draft circulated last week reinforces these directions while adding nuances. One key change is the removal of the ten-year lifetime label for life-extending installations. The text also contemplates a new mechanism: if a Member State’s actions disrupt competition, the European Commission could intervene by a ruling on the internal market and borders to curb distortions. The draft proposes that aid be distributed to companies by the Member State, while ensuring that distortions within the internal market are prevented through explicit design conditions.
Under the new framework, if the Commission determines that income redistribution distorts the internal market, it may impose limits. The latest version permits member states to allocate such revenues to their favored companies, altering the Commission’s traditional role in market abuse and distortion mitigation. The emphasis remains on safeguarding fair competition while allowing flexibility for individual states to manage their energy portfolios and industrial competitiveness.