On September 14, the European Commission proposed emergency intervention in the European energy market to ease the recent sharp rise in energy prices.
Solar PV plants across the European Union could be subject to temporary income caps under a new proposal aimed at helping energy consumers lower their electricity bills.
The main measures proposed by the European Commission include: Member States reduce electricity consumption by at least 5% during peak electricity consumption periods and reduce total electricity demand by at least 10% by March 31, 2023; Power generation companies are capped at €180/MWh; a tax of at least 33% is imposed on excess profits generated by the oil, gas, coal and refining sectors.
The European Commission is proposing temporary revenue caps for lower-cost marginal power generation technologies, such as renewables, nuclear and lignite, that supply electricity to the grid at a lower cost than the more expensive price levels set by marginal generators.
The European Commission said these marginal producers "have been earning substantial revenue" as gas-fired power plants drive up wholesale electricity prices.
European Commission President Ursula von der Leyen said in his State of the Union address on the 14th: "These companies are earning income that they never considered, or even dreamed of."
The committee recommends capping marginal revenue at €180/MWh ($180/MWh) by March 31, 2023, and says this will allow producers to pay for their investments without compromising investment in new capacity and operating costs.
However, Kristian Ruby, secretary general of power industry body Eurelectric, said the proposed measures to cap revenue for renewable and low-carbon power producers "have the potential to damage investor confidence".
According to the European Commission's forecast, EU member states will be able to earn up to 117 billion euros a year from the cap measures, with excess revenue being distributed to final electricity consumers affected by high electricity prices.
These revenues can then be used to provide income support, tax rebates, investments in renewable energy, energy efficiency or decarbonization technologies, the European Commission said.
The proposals state that the cap should be limited to market revenue and exclude gross generation revenue, such as those from support programs, to avoid a significant impact on the project's initial expected profitability.
According to trade body SolarPower Europe, while PV plants are also included, the revenue cap protects solar PV plants that cannot generate additional profits in the electricity market, such as those supported by feed-in tariffs, contracts for difference and corporate power purchase agreements power station.
However, member states do have the potential to introduce further caps without EU approval. "This creates a high degree of uncertainty for investors and jeopardizes the integrity and unity of the EU market," said Naomi Chevillard, head of regulatory affairs at SolarPower Europe. The European Commission should set a Europe-wide benchmark level for the new cap. "
In order to avoid excessive administrative burdens, the European Commission proposed that member states should be allowed to exclude power generation facilities with a capacity of less than 20kW from revenue cap measures.
The European Commission has also proposed so-called "temporary solidarity contributions" to cover excess profits from activities in the oil, gas, coal and refining industries that do not fall within the marginal revenue cap.
This will be collected by member states based on 2022 profits, which have increased by more than 20% on average over the previous three years. Income will be redistributed to energy consumers, especially vulnerable households, hard-hit companies and energy-intensive industries. Solidarity contributions from the minerals sector will apply within one year of entry into force and are expected to generate around €25 billion in public revenue.
In addition, as the EU faces a severe mismatch between energy supply and demand, the European Commission recommends that member states strive to reduce total electricity demand by at least 10% by March 31, 2023.
The EU's climate policy chief, Frans Timmermans, said the energy crisis "shows that the days of cheap fossil fuels are over and that we need to accelerate the transition to homegrown renewable energy."