SolarPower Europe disagrees with implications of EU windfall tax on renewables – pv magazine International
SolarPower Europe has issued a statement opposing any move by the European Commission to impose a lower maximum price for electricity than renewables compared to fossil fuels. Energy ministers from EU member states will meet this week to set out emergency measures to protect bill payers.
All eyes of the European renewable energy industry will be on the emergency meeting on September 9 between member states’ energy ministers and the European Commission.
The energy speech delivered this week by commission president Ursula von der Leyen specifically announced the EU executive’s desire to cap wholesale electricity prices as a separate measure for generators at low carbon and fossil fuel. Von der Leyen set revenue limits for renewables and nuclear power companies as the second of five energy crisis measures proposed by the commission, with a similar decision for fossil fuel companies labeled as the third measure.
This implies that the proposed revenue caps could be set at different levels for low-carbon and conventional electricity generators. This prospect has been opposed by SolarPower Europe, which has called for any limits on energy companies’ revenues to be applied “after market clearing”. Such a move would leave any maximum electricity price for households and businesses still tied, at least, to the cost of producing gas – currently the most expensive source of electricity.
The compensation system which sets the pan-European wholesale price for electricity – the figure received by producers for each kilowatt-hour they produce and sell on the wholesale market – implies that each producer “offers” its production costs, d ‘about zero for renewable energy up to the operating cost of gas-fired power plants. Demand is then met by working from the cheapest wholesale energy source until the required volume of energy is met, in which case each producer selling on the wholesale market receives the price from the supplier. electricity, and therefore the most expensive.
“We will propose a revenue cap for companies that produce low-cost electricity. Low-carbon energy sources generate, in these times – because they have low costs but have high market prices – huge revenues,” Von der Leyen said. “Incomes with which they have never calculated; income they never dreamed of; and income that they cannot reinvest to that extent. These revenues do not reflect their production costs. So now is the time for consumers to benefit from the low costs of low-carbon energy sources like, for example…renewables.
In contrast, apparently, the chairman of the commission said that oil and gas companies would be expected to make a “solidarity contribution” – language which implied that the higher production costs incurred by fossil fuel generators could be reflected in a higher revenue cap for each kilowatt hour. sold on the wholesale market.
SolarPower Europe challenged the commission chairman’s statement that renewable energy producers all enjoy the same kind of windfall profits as fossil fuel companies. He said the prevalence of fixed clean energy prices meant, for example, that around two-thirds of renewable energy producers in Germany were not making windfall profits.
“Most solar farms do not earn the wholesale price of electricity,” the trade body said in a statement posted this week on its website, in response to Von der Leyen’s speech. “They get a fixed price for the electricity they generate, either from a government-backed support program or a power purchase agreement (PPA) with an industrial consumer and should not therefore not be subject to exceptional measures.”
This statement skirts the fact that PPA prices have more than doubled in parts of Europe since Russia’s invasion of Ukraine in February forced already rising Covid rebound gas prices to lows. breathtaking levels, prompting the emergency measures being discussed. Less controversially, SolarPower Europe has called for any revenue cap to be applied at the pan-European level – perhaps reflecting nervousness about allowing the bloc’s more renewable energy skeptical member states to impose crippling taxes on clean electricity companies – and also said that any revenue cap should be time-bound, to keep the EU’s internal energy market functioning.
SolarPower Europe also called for more incentives for solar energy deployment, including the use of pandemic recovery and resilience facility funding provided to European member states by Brussels. Reflecting on the much-discussed need to decouple electricity prices from gas, he said encouraging the deployment of solar sites plus storage – alongside limiting electricity consumption through demand response measures – would be a big step in the right direction.
The commission will now seek to convince European Council energy ministers of the merits of its five energy crisis measures, which also include a cap on Russian gas prices, financial support for energy utilities and a mandatory reduction in electricity consumption during peak hours. periods. The Guardian reported this week that the commission wanted to impose a 5% reduction and that member states have suggested that such a decision should be voluntary.
SolarPower Europe said the proposed measures should not jeopardize investments in clean energy. In the UK, Solar Energy UK is considering trying to pre-empt imposition of the sort of windfall tax Von der Leyen is calling for in the EU by voluntarily suggesting a shift from fixed-income government incentives to contracts for difference. model used since 2017, which limits losses for public funds.
New Prime Minister Liz Truss this week presented the UK government’s energy price guarantee which will see the state subsidize national electricity costs for two years and business prices for six months, starting October 1 . The government will refund any difference in production costs to electricity suppliers in order to cap the bill for a typical household at £2,500 (€2,870) on average per year, with an equivalent scheme announced to support businesses.
Under this policy, the government will pay the costs of the UK Clean Energy Incentive Scheme instead of the fees paid by energy consumers for the duration of the price guarantee.
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