EU warned against ‘patchwork’ of taxes to alleviate energy crisis – EURACTIV

Emergency EU measures presented last week to alleviate the burden of high energy prices on consumers risk creating a patchwork of different interventions across Europe and depress investments in renewable energies, industry sources have warned.

The European Commission proposed two measures to redistribute the extraordinary revenues some energy companies have made due to the impact of soaring gas prices on the energy market.

These measures comprise:

  • A revenue cap on the sale of “inframarginal” electricity technologies such as renewables and nuclear, which the Commission has set at €180 per megawatt hour;
  • A “solidarity contribution” on benefits made by fossil fuel companies, taken from at least 33% of surplus profits made in the fiscal year of 2022.

But the implementation of those measures, which is left to national governments, is causing concern that industrial and household consumers will benefit differently depending on which country they are located in.

“The proposals for windfall profit recovery are very vague and are basically left to the member states to implement,” said Bram Claeys from the Regulatory Assistance Project, a climate and energy think tank.

“While they sound quite good, the implementation might be fragmented, which is a really big problem in itself,” he told EURACTIV.

Brussels estimates that EU countries could use the measures to raise €142 billion to support struggling consumers and invest in clean technology and energy efficiency.

However, Claeys was sceptical about this, saying there is a “big risk that only a fraction of that is actually recovered”.

Uneven implementation also risks distorting the EU electricity market, and undo years of work to integrate national power markets across Europe, Claeys warned.

Industry concern

When it presented the emergency measures last week, the European Commission aimed to ensure a coordinated approach in national responses to the energy crisis.

The revenue cap is EU-wide, and set low enough to hit fossil fuel-based electricity production more than power generated from nuclear and renewables, which are cheaper to produce and will retain high profit margins, even with a revenue cap of €180/MWh.

However, the flexibility for EU governments to retain already-existing national price caps or set lower ones is raising concerns among the renewable energy industry.

“A member state could decide, if they have that information available, to have a lower revenue cap on inframarginal technologies: nuclear, renewables for instance, that could be lower because their levelised costs are typically lower,” an EU official explained.

But a patchwork of different price caps, unilaterally introduced by individual EU countries, would create investment uncertainty, warned WindEurope, an industry body.

“An EU-wide cap on revenues from wind should be precisely that – a single EU-wide cap. Allowing countries to deviate from it and have lower caps creates confusion and uncertainty – and will slow down the investments we so badly need,” said WindEurope’s CEO Giles Dickson.

Similar fears have been voiced by the solar power industry.

“We greatly regret the possibility that is preserved for member states to set a lower cap on revenues at national level,” said Naomi Chevillard, head of regulatory affairs at SolarPower Europe.

“This creates high uncertainty for investors and endangers the integrity and unity of the EU market. The European Commission should set a European-wide base level of proportionality for the new cap measures,” she added.

The solar industry has also flagged concerns that, if the price were lowered, it could hit power purchase agreements, a vital tool in building out renewable energy capacity.

Meanwhile, any price cap must come with the ability for long-term heat and power retail contracts, according to Sanjeev Kumar from the European Geothermal Energy Council.

“Renewables subsidising the high price of fossil electricity without long-term supply contracts in the retail market for heating and electricity would be abhorrent,” he added.

The European Commission itself has warned against “uncoordinated caps” that “may lead to significant distortions between generators in the Union, as generators compete EU-wide on a coupled electricity market”.

EU ministers are currently reviewing the proposals and are due to agree on them at an emergency meeting on 30 September.

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