The European Parliament's energy committee on July 19 agreed to drop a proposal to cap power plants' windfall revenues if Europe faces another energy price crisis, a measure the energy industry had strongly opposed.
The EU is negotiating reforms of its electricity market, designed to expand renewable energy and protect consumers from price spikes such as those following Russia's invasion of Ukraine last year.
The EU Parliament's energy committee agreed a position on the reforms on Wednesday, which did not include the revenue cap.
Nicolas Gonzalez Casares, the European Parliament's lead negotiator on the reform, had previously proposed the cap, to raise money countries could spend on cushioning citizens from high bills.
The proposal did not win support, despite being backed by some lawmaker groups including the Greens.
Industry groups have opposed the cap - which the EU had already applied a temporary version of during this winter, in response to soaring energy prices. They said it would deter investors at a time when huge investments are needed in low-carbon energy generation.
From December to June, the EU's temporary cap had skimmed off revenues above 180 euros/per megawatt hour that power producers made from selling electricity into the market.
Naomi Chevillard, Head of Regulatory Affairs at SolarPower Europe, blamed the measure for slowing down Europe's power purchase agreement market last year.
"It resulted to a contraction of the PPA market by 21% in 2022 due to regulatory uncertainty," she said.
Wholesale electricity prices have fallen significantly from record highs of above 700 euros/MWh last August, but average prices in Europe are still more than double their 2019 levels, according to the International Energy Agency.
EU lawmakers and countries need to negotiate the final power market reform, and are aiming for a deal before EU Parliament elections next year.
Governments are still struggling to agree their negotiating position, with sticking points including whether countries will be allowed to subsidise existing power plants and use any money this raises to, in turn, subsidise industries.
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