Fedea values ​​the electrical reform proposed by Brussels and sees it as less "interventionist" than the Spanish one

MADRID, 21 Mar.

Fedea values ​​the electrical reform proposed by Brussels and sees it as less "interventionist" than the Spanish one


The Foundation for Applied Economics Studies (Fedea) has positively assessed the electricity market reform proposed by the European Commission, considering that it is "reasonable" for the purpose of increasing incentives for the deployment of new renewable generation and increasing the protection capacity of consumers by promoting long-term contracting.

In a study carried out by Professor Diego Rodríguez, associate researcher at Fedea, the organization points out that the Brussels proposal is in line with the Spanish Government's proposal on the use of long-term contracting auctions based on the settlement of differences, known as CFDs contracts.

However, the author points out that the Commission "is clearly committed to a lower degree of intervention" than the Spanish Government, as well as to making public intervention compatible through an auction mechanism, aimed at the entry of a new generation, with the promotion commercial agreements between generators and consumers and the development of other instruments to increase the liquidity of forward markets.

The Brussels proposal will begin to be discussed by the European Parliament and the Council for its approval and entry into operation. Among the contributions received during the prior consultation period is the proposal adopted by the Spanish Council of Ministers on January 10.

Fedea recalls that the objective of the electricity market reform is not to integrate temporary instruments, but rather structural regulatory changes in the configuration of the electricity market, particularly in forward markets.

The fundamental changes that are proposed are substantiated in the modification of the Regulation and the Directive of the internal electricity market. In the first case, the provisions that affect wholesale markets are included, while the Directive mainly includes those that affect final consumers.

According to Fedea, the most relevant changes in the Regulations are included in a new chapter that, for the first time, regulates long-term energy purchase contracts under commercial conditions, called PPAs (Power Purchase Agreements), as well as long-term purchase contracts based on settlement for difference, CFDs.

With regard to PPAs, Fedea underlines the growing recognition that the European Commission has been giving them as an instrument for the promotion of new entry of renewable generation.

In fact, the new Commission proposal establishes the requirements and procedures to facilitate the development of these contracts between generators and consumers, including the novelty that in public support procedures preference is given to bidders who present a signed PPA or a Commitment to sign a PPA for part of the generation associated with the project.

According to the Commission's proposal, public support must take the form of auctions through which long-term contracts are established in the form of CfDs with the promoters of new investments in renewable and nuclear generation, excluding hydraulic generation in the first case. with reservoir.

The Commission's proposal establishes that the higher income obtained in the event that the market price is higher than the price established in the long-term contract with the generator must be distributed proportionally among all consumers.

For Fedea, the Spanish Government's proposal is in line with that of the Commission in recognizing the role played by the short-term market and the need to preserve it, as well as the need to promote forward markets.

"However, the Government's proposal did not pay attention to PPAs, despite their greater relative importance in relation to the countries around us, and was firmly committed to the development of CfDs as a form of centralized contracting for a large part of the electricity with the generators," says Fedea.

Instead, he adds, the Commission proposal would make it possible to use these contracts as a mechanism linked to the entry of new renewable generation and investments in nuclear generation. However, not in hydroelectric generation with a reservoir, as proposed by the Spanish Government's proposal.

Nor could CfDs be used with wind, solar or biomass generation already installed, as stated in the Spanish proposal, unless it was generation associated with expansions or repowering of already installed capacity, highlights Fedea.