'Distortive' | Renewables sector rebuffs revenue cap proposal ahead of EU energy meeting

The EU’s renewables and wider energy sector has largely rejected a proposal by European Commission president Ursula von der Leyen to create a cap on revenues from power generation, in particular that from wind and solar plants, ahead of an emergency meeting of EU energy ministers tomorrow (Friday).

The commission didn't detail where prices should be capped, but the dpa newswire and other media said the upper price limit could be set at €200 ($202) per megawatt hour of electricity produced, citing a legislative proposal circulating in Brussels. That would be well below the day-ahead future price of €364/MWh at Germany's EEX wholesale market early Friday.

“Measures on windfall revenues of power generators should target actual profits only and exempt renewables that do not make windfall profits,” SolarPower Europe said in a statement.

“Most solar farms are not earning the wholesale electricity price.”

Renewables developers get a fixed price for the power they produce either from a government-backed support scheme or a power purchase agreement (PPA) with an industrial consumer, and should therefore not be subject to windfall measures, the industry group added.

“Preliminary estimates from Germany suggests that around two-thirds of solar PV electricity is not making windfall profits. Companies exporting gas to Europe, on the other hand, are reporting historically high profits and should also be called on to contribute.”

If a cap is applied at all, it should be set after market clearing, be aligned at European level, and also be valid only for a limited period, SolarPower Europe demanded.

The group stressed that PV offers direct and immediate price relief to consumers at times of sky-high power prices, and any emergency measures should include plans to speed out the solar roll-out.

Eurelectric, which represents European utilities, called to mind that it is Russian gas curtailment that has triggered the current energy crunch, and caused day-ahead electricity prices to grow by 532% between January 2021 and August 2022.

“The root cause of the problem is a shortage of gas supply and our addiction to imported fossil fuels,” Eurelectric secretary general Kristian Ruby said.

“Governments should seek to tackle this rather than resorting to distortive, ad-hoc interventions in the electricity market. In parallel, we also encourage sobriety measures to save energy this coming winter.”

Von der Leyen’s proposed cap on windfall revenue for power generators is likely to cause a heated debate among EU energy ministers Friday.

Slovakia’s prime minister Eduard Heger talking to journalists Wednesday insisted that any tax on excessive profits of energy utilities must be redistributed to the individual EU member states.

Slovakia’s largest power producer Slovenske elektrarne is part-owned by Italian energy giant Enel.

Controversy is also likely to erupt about von der Leyen’s proposal to set a price cap for Russian gas imports in order to stop President Vladimir Putin to finance the invasion of Ukraine with continuously high revenue from fossil energy exports to the EU.

EU energy ministers will hold their emergency meeting around noon on Friday, followed by a press conference.