Brussels, 13 February 2025
At two weeks from the EU Affordable Action Plan, the electricity industry calls on the European Commission to avoid ill-designed short-term measures, suggested in the Draghi’s report, that would drive up costs for European consumers. Instead, the Plan should include structural enablers of affordable energy, as detailed in Eurelectric’s position paper.
Extending this legislation to utilities will increase bureaucracy, make the market less liquid and tie up billions of euros that could otherwise be invested in the transition. In other words, policymakers will achieve the exact opposite of what the clean industrial deal is meant to, – said Eurelectric’s Secretary General Kristian Ruby.
Eurelectric says YES to:
- Deploying massive homegrown renewable and clean power to displace fossil fuel imports. The International Energy Agency (IEA) estimates EU electricity consumers saved €100 billion during 2021-2023 thanks to 150 GW of new solar and wind capacity, displacing 230 TWh of fossil fuel generation. This lead to a price reduction on all European markets with more competitive prices for industries. Increasing clean power deployment requires a swift implementation of the Renewable Energy Directive, including faster permitting and rapid grid connections.
- Boosting electrification to reduce system costs by spreading the investment across more consumers. Increasing power demand needs:
- Fixing the Energy Taxation Directive, taxing electricity 1.4 times more than gas.
- De-risking investments in clean electrification projects through bank guarantees, streamlined lending processes and sound public financing options to increase utilities’ debt capacity.
- Expand and digitalise power infrastructure to ensure timely connections
- Developing long-term contracts such as PPAs and CfDs. The European Investment Bank could support PPAs development by introducing guarantees for counterparty risks.
- Mainstreaming flexibility by mobilising all technologies on the supply side, increasing storage and activating demand-side response. As recognised by Draghi, flexible industrial consumers can significantly help reduce overall system costs, support renewable integration and enhance grid flexibility while reducing energy costs for industry.
- Implementing the electricity market design reform
Eurelectric says NO to:
- Inframarginal price caps. This measure disincentivises consumers to enter long-term hedging contracts, as they would assume that they are already hedged by the regulator itself. Invoking a semi-permanent state of crisis with frequent interventions in the market as this will deter investors at a time when their capital is crucially needed.
- Mandatory extension of long-term contracts with a clawback option for renewable and nuclear assets. This measure becomes counterproductive for those assets who operate on scarcity signals from the market, such as hydropower. Hydro plants generate electricity when supply is scarce, providing flexibility to the system. Mandating a long-term arrangement would transform hydropower into a baseload resource with less system value.
- Treating utilities as investment firms by removing the ancillary activity exemption (AAE) in the Markets in Financial Instruments Directive II (MiFID). This would reduce energy companies’ capacity to hedge as they would need to respect higher collateral requirements to trade energy as if they were banks. This would mean that fewer PPAs are offered to the markets and that managing risks would become more difficult and costly, ultimately raising energy costs for consumers.
- Requiring suppliers to provide a share of their publicly-subsidised production through PPAs at ‘production cost plus mark-up’ to specific industries: This is concerning as it create a sort of regulated supply tariff for certain customer segments, resulting in a regression from the liberalisation process and leading to regulatory instability.
- Tariff exemptions or preferential treatment of specific consumers: Exempting specific consumer categories from the payment of some costs such as network charges, taxes or levies, inevitably increases the cost for other consumers, discouraging electrification. A preferred option to support industry should instead come via direct compensation from general taxation.
Read Eurelectric’s position paper (December 2024)
Download on Eurelectric’s website
Source – Eurelectric (by email)