Emergency measures should target real profits only and support investment in renewables

Emergency measures on electricity markets should be temporary. Any measures on profits should target actual profits only. And they should support the urgent need for increased investment in renewables.

Governments need to help citizens and businesses deal with very high energy prices. Electricity prices have increased up to 10-fold over the last year, driven by the high price of gas. It is a direct result of Russia’s war in Ukraine and weaponisation of gas supplies to Europe.

On 9 September EU Energy Ministers will discuss a range of options for emergency measures to deal with high gas and electricity prices.

Renewables are the cheapest and fastest way to reduce Europe’s dependence on fossil fuel imports. The current energy crisis shows we need more renewables ASAP. That is central to Europe’s new energy strategy, REPowerEU. So any measures on energy prices and markets need to ensure it still makes sense to invest in renewables.

Measures on windfall revenues of power generators should target actual profits only. Most wind farms are not earning the wholesale electricity price. They get a fixed price for the electricity they produce. Either from a govennment-backed support scheme. Or a Power Purchase Agreement (PPA) with an industrial consumer. Or they’ve hedged their revenues against fluctuations in the wholesale market – so they don’t earn the upside from higher prices. Wind farms that are on fixed revenues should not be subject to windfall measures.

The emergency measures should be time-limited. And long-term reforms to the electricity market design should be taken forward in full consultation with industry.

Demand reduction and demand response measures will have a crucial role to play in dealing with the current crisis.

---

See the Infographic