EU Commission warns against regulating energy prices and subsidies for renewables

The European Commission has said that member states should remove distortions from the energy market, such as regulated prices and high subsidies for renewables. The Commission said that such measures may prevent the market form delivering the correct incentives for generation capacity and therefore lead to higher prices for consumers.

The approach was one of a series of measures outlined by the Commission in its guidance for member states intervention in the electricity market.

EU energy commissioner, Gunther Oettinger said:

The ultimate aim of the market is to deliver secure and affordable energy for our citizens and business. Public intervention must support these objectives. It needs to be cost-efficient and be adapted to changing circumstances.

The guidelines focused on renewable energy support schemes and back-up capacities for renewable energy. The Commission asserts that technology such as wind and solar needed state intervention to develop, but as investment in solar falls and production expands, member states have begun the process of reforming their renewable energy support schemes.

The Commission recommends that state support should be restricted to what is needed to make renewables competitive. Support schemes should also have the flexibility to respond to falling production costs. They emphasise that technologies should only gradually exposed to market prices and in the long term all state support must be removed. Feed in tariffs should be replaced by feed in premia to give incentives to producers to respond to market changes. National governments are advised to avoid retroactive scheme changes to ensure certainty for investors.

Prior to deciding how to generate sufficient electricity for when the wind doesn't blow and the sun doesn't shine, governments should analyse the causes of inadequate electricity generation. The Commission suggests governments should seek to ensure renewable energy producers are able react to market signal and be sufficiently flexible on the demand side. The Commission suggests this can be achieved by such measures such as promoting different tariffs to consumers.