EU regulator warns against repeating emergency energy measures

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The European Union’s energy regulator has warned against repeating untargeted measures that governments used during last year’s energy crisis to curb rising prices, saying they could increase fossil fuel use and Can send wrong signals to investors.

The comments come as France and Germany debate the size of proposed reforms to the bloc’s electricity market and whether state subsidies should be allowed for existing power producers such as France’s nuclear stations.

The reforms were proposed by the European Commission in March in the wake of record high energy prices following Russia’s full-scale invasion of Ukraine last year. Their goal is to create a stable market that can withstand future supply shocks and the volatility of renewable energy growth.

EU energy watchdog Acer said in a report published on Friday that widespread subsidies used by governments to protect electricity consumers from high increases in wholesale energy prices last year could trigger “overall energy inefficiency” and Can prevent consumers from cutting down on electricity usage. They can do this by “distorting or neutralizing market signals”.

It also highlighted that the security of energy supply could be affected due to “increased use of resources” by subsidizing bills to lower prices.

“Member countries face trade-offs in the choice of support measures during and after the crisis. It is important to strike the right balance between reducing retail prices and preserving incentives to reduce demand, said Christian Zinglersson, director of Acer.

Overall, EU countries will spend €646bn on emergency energy measures in 2022, according to figures from think-tank Bruegel. The Acer report said the funding went towards finding alternative fuels to make up for the price cap, energy savings and gas lost due to supply cuts by Russia.

The Acer report found that prices passed on to industrial consumers in Lithuania, Latvia and Hungary were steep, while declines were recorded in Germany and France, whose governments used their fiscal firepower to reduce costs.

The regulator ultimately said the EU “must address the challenges posed by decarbonisation requirements and the need to ensure security of supply on affordable terms”.

Zinglerson appeared before EU ministers gathered in Valladolid, Spain this week to discuss the resilience of the bloc’s electricity grids, which is becoming a growing concern as an increasing number of renewable energy generators are connected.

The power industry has warned that grid conditions will prevent more wind and solar installations from being brought online as they are not able to cope with weather-dependent power generation interruptions.

This week, EU countries experienced sudden price fluctuations, with spot prices of electricity in the Czech Republic reaching €200 per MWh due to high demand and low wind, while solar production in Germany and the Netherlands Negative prices were observed due to higher levels of . Net.

The European Commission’s proposed electricity market reform aims to reduce the impact on consumers of such windfalls, but has been stuck due to a Franco-German disagreement.

Germany is protesting that France could subsidize its nuclear industry and take industrial advantage of cheaper domestic electricity prices, which could destabilize the bloc’s internal market.

In Valladolid, Spain’s Energy Minister Teresa Ribera, who holds the rotating chair of EU member states, said Madrid has proposed a new agreement and that an agreement should be reached, “the sooner the better”.

But Sven Geigold, state secretary at Germany’s Ministry for Economics Affairs and Climate Action, said they were “warmly welcomed by our French partners on the issues, but there is still a way to go” to reach a comprehensive agreement.