Ministers tweaking emergency EU energy measures

Biomass-fired generation sold on the spot market remains subject to the EU's proposed €180/MWh revenue cap. Hard coal, but not lignite, continues to be exempt even if a change to the draft text now allows EU countries to set their own national cap on power-market revenues from hard coal-fired generation.

Ministers aim to achieve political agreement on 30 September on a regulation setting out emergency EU energy market measures.

A recent draft text, amended by countries and prepared for the meeting in Brussels, suggests the cap could be applied until 31 December 2023. EU states also reserve the right to adopt an EU-wide price cap before 1 December.

The draft also would allow EU members to exempt their generators with an installed capacity below 1MW, instead of only below 20kW, as previously proposed by the European Commission on 14 September.

A new threshold may adversely affect switching to coal-fired generation, as opposed to biomass and other renewables, as member states add a waiver for the €180/MWh power cap for "hybrid plants which also use conventional energy sources" if there is a "risk of increasing CO2 emissions and decreasing renewable energy generation".

And countries believe changes to the commission's original text allow for the possibility of further limiting revenues from those producers subject to the EU-wide €180/MWh revenue cap for power generation. This would be effectuated by lower national thresholds on market revenues from hard coal-power generation as the latter's price "can be significant[ly] lower than the price of the marginal technologies in some member states".

Still, hard coal, as opposed to lignite, is not included in the fuels subject to the general EU-wide cap on market revenues for electricity producers. Solid or gaseous biomass fuels, excluding bio-methane, in principle remain on the list of subjected fuels, alongside wind, solar, geothermal, hydropower (excluding pumped hydropower) as well as waste, nuclear, lignite, crude oil products. New to the list is peat.

A legally non-binding clarification to the draft regulation says "the cap should not apply to technologies with high marginal costs relating to the price of the input fuel necessary to produce electricity, such as gas and hard coal-fired power plants, as their operating costs would be significantly above the level of the cap and its application would jeopardise their economic viability." Although biomass is not mentioned in this part, and remains included as one of the fuels to which the cap would apply. Under current spot wood pellet prices in northwest Europe, the breakeven power price for a pellet-fired unit of 40pc would be around €237/MWh, well above the €180/MWh cap.

That said, further in the non-binding clarification to the regulation, without directly mentioning biomass, the draft allows for countries to maintain incentives for reduced gas consumption by not applying the revenue cap on technologies, such as demand-response and storage that "directly compete with gas-fired power plants".

Current changes to the commission's original text could allow EU countries to set a higher revenue cap for producers using biomass and other targeted energy sources, as well as include other energy sources under a national revenue cap.

And surplus profits generated in the coal sector, alongside crude oil, gas and refinery sectors, remain subject to a "temporary solidarity contribution" although countries want to calculate on the basis of an average of taxable profits over four, not three, preceding years.

By Dafydd ab Iago