Electricity market reform: two-way contracts for difference to become EU support standard

The European Commission on March 14 unveiled proposals to reform the EU electricity market to accelerate the expansion of renewables and the phase-out of gas. At the presentation, EU Energy Commissioner Kadri Simon (photo) emphasized that the measures are intended to »enhance the stability and predictability of energy costs across the EU.«
Accordingly, all state subsidies for renewable and non-fossil power generation, including nuclear power, are to be made via two-way contracts for differences (CfD). This should lead to stable revenues for electricity producers, since in the event of a market price below the contract price, the difference is paid by the state to the operator. On the other hand, revenues above the contract price are to be skimmed off and passed on to electricity consumers to protect them from excessively high prices. From the operator’s point of view, this is therefore a fixed-price tariff.
Furthermore, the feed-in of renewable energies into the grid is to be simplified and the rules for the joint use of renewable energies are to be revised.
The mandatory introduction of contracts for difference is clearly criticized by some associations of the renewable energy industry such as the German Renewable Energy Federation (BEE). In a statement, the BEE said that the German government should advocate a voluntary solution in the further legislative process. For the German Association of Energy and Water Industries (BDEW), on the other hand, »the design of the financing of the expansion of renewable energies (key words: PPAs and CfDs) goes in the right direction.« After all, no pressure would be exerted on project developers to conclude contracts for differences.
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