The governments of Germany, Denmark, Estonia, Finland, Luxembourg, Latvia and the Netherlands have sent a joint letter to the European Commission in which they ask that the reform of the electricity sector in the EU be carried out under free market parameters and without price interventionism.
The letter, to which the newspaper Expansión has had access, is a harsh blow to the proposal put forward by the Spanish government to reform the wholesale electricity market, or pool.
In essence, the Spanish government intends to carry out a reform of the market by cancelling it almost entirely and introducing regulated prices, with auctions supervised by a regulatory body, to establish long-term supply contracts, the so-called Contracts for Difference (CfDs).
The letter is particularly critical of the CfDs model. CfDs could “play a role in long-term markets if they benefit the renewable energy transition,” the letter says. But “it is important that they maintain market functioning” and “do not undermine investor confidence”. “We are concerned about applying them to all generation technologies,” the letter continues, “because they could be counterproductive”.
CfDs in any case, “should be voluntary”, and “should not be imposed retroactively, should focus on new renewable investments, and prices should be determined through competitive auctions or tenders in accordance with state aid guidelines, not regulated prices”. CfDs should also be “well designed”.
