EU countries agree power demand reduction targets to tackle energy crisis

Prior to Russia's war in Ukraine, the EU imported some 40% of its gas from Russia

The measures, first proposed by the European Commission on 14 September, aim to shield consumers by seizing the extraordinarily profits made by some energy firms and using those to support households or help them invest in green technologies.

“Our citizens and businesses are eagerly waiting for the EU to come up with concrete proposals on how to take on currently extremely high energy prices,” said Jozef Sikela, the industry and trade minister from the Czech Republic, which currently holds the EU’s rotating Council presidency.

“The agreement reached today will bring relief to European citizens and companies. Member states will flatten the curve of electricity demand during peak hours, which will have a direct positive effect on prices. Member states will redistribute surplus profits from the energy sector to those who are struggling to pay their bills,” he said in a statement outlining the main elements of the deal.

EU countries agreed the proposals in around two weeks, after several meetings to hash out the details. In the end, they agreed on the three measures, but included more flexibility for member states to implement them.

“The Czech presidency has worked extremely hard in order to provide as much flexibility to all member states as possible. And I have to underline, without limiting the ambition and help that households and businesses need now,” Sikela said as he arrived for the meeting.

For instance, EU countries now have more wiggle room to meet the 10% voluntary reduction target for electricity consumption. And Malta and Cyprus are exempted from the 5% mandatory demand reduction target for peak consumption hours.

Meanwhile, EU countries have also pushed for more freedom in implementing the two revenue measures. These include a revenue cap of €180 per megawatt hour on cheap electricity and a “solidarity contribution” on revenues made by oil and gas companies.

While Brussels had proposed an EU-wide, uniform approach to the levies, EU countries pushed for more lenience. This includes allowing countries to “set a specific cap” on the market revenues obtained from the sale of electricity produced from hard coal.

Governments will also be able to set a higher revenue limit for producers with investment and operating costs “higher than the Union-wide cap” and exempt their chosen “supplier of last resort” from the mandatory electricity demand reduction target at peak times.

Renewable energy industry nervous

The agreement leaves the door open for EU countries to keep existing national price caps on electricity or set new caps and taxes on energy companies at the national level.

This is making the renewable energy industry nervous, with some warning this could have a severe impact on green investments.

Even though governments are right to protect families and businesses from rising energy bills, “what is decided today could worsen the energy crisis,” the industry body WindEurope warned in a statement on Friday morning.

“Europe needs big investments in home-grown renewables. Everyone agrees that – and that it’s the route out of the crisis. But as it stands, the emergency Regulation will put many renewables investments on hold,” the statement continues.

WindEurope argues that new taxes planned by EU governments on top of these measures would hit total revenue rather than profits and will send renewable investors fleeing to other economies, like the US.

These fears are echoed by the solar industry, which is calling for emergency measures to accelerate the deployment of renewables. These include training to ensure enough skilled workers are available to install solar panels as well as improvements in permitting, tendering and financing procedures, said SolarPower Europe, a trade association.

The final text of the regulation will be adopted this week and will apply from 1 December 2022 to 31 December 2023. The demand reduction targets will apply until 31 March next year while the €180/MWh cap on market revenues from electricity generators will apply until 30 June.

Kira Taylor, EurActiv.com

This article first appeared on EurActiv.com, an edie content partner