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EU Commission: Communication “Delivering the internal electricity market and making the most of public intervention”

The European Commission has today released its Communication “Delivering the internal electricity market and making the most of public intervention”, together with a set of Staff Working Documents on important aspects of the Communication. The package shall give guidance to Member States on state interventions aimed at preventing market distortions and providing secure and affordable energy. The documents cover in particular generation adequacy, the design of renewables support schemes, the use of and model agreements for renewable energy cooperation mechanisms, and demand side flexibility mechanisms.

Based on best practices the Commission proposes the following:

1. Renewable energy support schemes

Financial support shall help making renewables competitive, gradually reducing support to zero with falling production costs. Feed in tariffs should be replaced by feed in premiums or other support instruments which give incentives to producers to respond to market developments. At the same time investors’ legitimate expectations shall be respected and unannounced or retroactive changes avoided. In order to keep costs for consumers low, the Commission calls on Member States to better coordinate their renewable energies strategies.

2. Back-up Capacities for Renewable Energy

In order to provide for cost-efficient back-up capacities for the growing amount of intermittent renewables and take full advantage of the European market the Commission proposes to first analyse the causes for inadequate generation and remove any distortions that may prevent the market from delivering the right incentives for investment in generation capacity. Besides the Commission calls on the governments to ensure that renewable electricity producers react to market signals and promote flexibility on the demand side. Additionally, the Commission says any back-up capacity mechanism should not be designed having only the national market in mind but the European perspective.

3. Impact of Communication for Germany

While the Communication published today is not a legally binding act, it does set out important principles which the Commission will apply when assessing state interventions relating to renewable support schemes, capacity mechanisms or measures to ensure consumer demand response. They are therefore relevant to the future enforcement of EU state aid rules and EU energy legislation. The Commission will also consider whether to propose legal instruments to ensure that these principles are fully implemented.

The new German government will have to take into account the Commission’s package when deciding on future steps for the German Energiewende, including the development of feed-in tariffs in the EEG. In the coming days and weeks, we will look further into various aspects of the Communication and the Staff Working Documents.

Sources: Overview Package European Commission [1], press release [2], Q & A [3]

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