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WindEurope Urges European Parliament to Reject Proposed Revenue Caps

RWE Secures Agreements for Lease with The Crown Estate to Develop Dogger Bank South Offshore Wind Farm Sites. (Credit: Maximilian Kaiser from Pixabay)

The industry, represented by , is raising concerns over MEP Nicolás González Casares' proposals on revenue caps, urging the European Parliament to reject them. As the (EU) debates a revised electricity market design, the European Commission has already introduced a targeted reform to address the investment uncertainties resulting from uncoordinated government interventions in electricity markets.

WindEurope is advocating for the European Parliament and Member States to adhere to the Commission's plan, as MEP González Casares' proposal would lower the requirements for applying revenue caps. This change would grant Member States the freedom to design these caps and make them more permanent. WindEurope argues that such national interventions would undermine the EU's electricity market, discouraging investments in domestic sources. The industry body asserts that these interventions are detrimental to both consumers and energy security.

As part of its efforts to combat climate change, the EU is on the verge of increasing its Renewable Energy target for 2030 from 32% to 42.5%. Specifically for wind energy, this entails doubling the current installation rate to 30GW/year. However, in 2022, Europe invested only €17bn in new wind farms, a significant decrease from €41bn in 2021. Additionally, orders for wind turbines plummeted by 47% compared to the previous year.

WindEurope attributes this decline to inflation and uncoordinated government interventions in electricity markets, which have eroded the foundations of the EU's internal energy market. The imposition of national taxes, levies, and revenue caps has significantly diminished investor confidence, resulting in only 10GW of new wind farms reaching Final Investment Decisions (FID) in 2022. This amount represents only a third of the yearly capacity required for Europe. Notably, no large-scale offshore wind farms received FID in 2022.

The EU's electricity market design plays a critical role in ensuring the necessary investment certainty to foster renewable energy growth, combat the energy crisis, and accelerate climate action.

WindEurope supports the European Commission's balanced proposal for revising the EU's electricity market design. However, MEP Nicolás González Casares' draft report seeks to lower the threshold for Member States to declare regional “electricity price crises.” This designation would allow them to apply revenue caps on inframarginal generation, and Member States would gain more flexibility in designing these caps. WindEurope argues that adopting this proposal would further fragment the EU's electricity market and discourage much-needed investments.

In its call to action, WindEurope has presented a new position paper, urging Brussels and national governments to take specific measures. These include avoiding uncoordinated interventions in the power market, permitting various pathways to market for wind energy (such as two-sided [CfDs], Power Purchase Agreements [PPAs], and merchant investments), facilitating corporate renewable PPAs, supporting the expansion of Europe's electricity grids, and facilitating the development of hybrid offshore wind farms.

WindEurope firmly advocates for rejecting MEP González Casares' proposals and stresses the importance of a unified approach to promote renewable energy and address the energy crisis while accelerating climate action.

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