EU Seeks to Resolve Deadlock on Power Market Reform on Friday

(Bloomberg) -- The European Union will on Friday seek to resolve a deadlock between France and Germany over the role of nuclear energy in the bloc’s power market and pave the way for a deal on a key reform meant to help the shift to a low-carbon economy.

In a compromise shared with EU governments on Thursday, Sweden proposed a limited possibility of using revenues from the so-called contracts for difference — a way to subsidize renewables — to prolong existing power plants, according to a document seen by Bloomberg News.  France wants to use such a tool to extend the life of its nuclear fleet.

Another change suggested by Sweden, the holder of the EU’s rotating presidency, is to give its 27 member states discretion on how to distribute the revenues to take into account varying national situations while monitoring the effects on the internal market. The provisions aim to help allay Germany’s concerns about what it saw as unfair subsidies to France’s atomic sector. 

The EU is overhauling its economy as part of the ambitious Green Deal strategy to reach climate neutrality by 2050. At the same time, the bloc is seeking to boost energy security after Russia, its main natural gas supplier, limited shipments of the fuel following Moscow’s invasion of Ukraine.

Sweden wants to secure an agreement before its presidency term ends Friday on a mandate for talks with the European Parliament about the final shape of the reform. The risk is that further delays eventually could stall the talks as political tensions rise ahead of elections to the bloc’s assembly next spring.

The compromise also includes extending an emergency windfall profit cap until June 30, 2024, and makes all energy sources, including natural gas, eligible for subsidies to provide backup capacity as long as they emit less than 550 grams of carbon dioxide per kilowatt hour. 

Plants exceeding the threshold, such as coal-fired power generators, could be exempted if they meet a set of criteria, with procurement of their capacity limited to one year.  

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