The EU must avoid extending the income ceiling for renewable energy sources



According to the European Commission, it is unnecessary and inadvisable to continue the energy market emergency measures approved at the end of 2022. This means that the €0.18 ($0.19)/kWh price cap for solar and other renewable energy sources will no longer apply in most Member States as of June 30.

In its report on emergency measures to address high energy prices, the Commission stated that “the continuation of these measures does not currently appear necessary or advisable” because “supply and prices in the EU electricity market have now changed significantly from record high levels last year.” The report states that measures to reduce electricity demand, a cross-border income cap and retail pricing rules “promoted calming the European energy market, among other emergency proposals approved in 2022”.

The cross-border revenue cap for renewables, nuclear power and lignite sets a price cap of €0.18/kWh and has been in place since December 2022 in most member states. It is valid until 30 June 2023, except in Austria, the Czech Republic, Finland, France, Luxembourg, Poland, Portugal, Slovenia and Spain, where it applies until 31 December 2023.

In Cyprus, the termination of the measure is based on a decision issued by the regulatory authority. In Slovakia, the measure is valid until 31 December 2024. And in Germany, its application period can be extended until April 30, 2024, according to the report. The country is said to be still deciding whether to proceed with the measure.

The commission said the implementation of the marginal revenue cap was heterogeneous. In the public hearing on the possible extension, most respondents opposed it, arguing that this heterogeneous implementation created uncertainty for investors and prevented new investments. They also said that the measure was difficult to implement and entailed high administrative costs compared to their benefits.

It said it had little data to report on the revenue generated by the implementation of the income cap. Bulgaria collected BGN 321 million ($176 million) in December 2022, while Lithuania collected around EUR 10 million by March 9, 2023. The roof’s revenues were initially estimated to exceed 50 billion euros.

“However, these assumptions already seem unlikely to materialize at the time of reporting,” the commission said.

The report highlights concerns that the impact of the emergency measure on existing power purchase agreements (PPAs) and its abandonment of new ones are key factors in the decision not to extend the revenue cap. In particular, it raises concerns about situations where the cap is applied to fictitious revenues based on wholesale electricity prices, which can lead to producers having to sell electricity at a loss.

“A possible continuation of the measure would hinder one of the goals presented in the electricity market planning proposal, i.e. encouraging the introduction of power purchase agreements and ensuring the most liquid power purchase agreement market,” the commission stated.

David is a passionate writer and researcher who specializes in solar energy. He has a strong background in engineering and environmental science, which gives him a deep understanding of the science behind solar power and its benefits. David writes about the latest developments in solar technology and provides practical advice for homeowners and businesses who are interested in switching to solar.

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