European energy intensive industries (EII's) is facing unsustainable electricity prices that affect its global competitivness.
So far, financial support for renewable energy producers in Europe has mainly taken the form of Power Purchase Agreements (PPAs) or Contracts for Difference (CfDs). However, these mechanisms do not necessarily guarantee competitive prices for Energy-Intensive Industries (EIIs). Complementary instruments, such as CfDs designed specifically for EIIs, could help ensure access to more competitive electricity prices.
The implementation of CfDs can take different forms, but the principle remains a two-sided contract:
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If the market price exceeds the strike price, the EII is compensated for the difference.
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If the market price falls below the strike price, the EII pays back the difference.
Several aspects should be considered in their implementation. For example, in the case of CfDs for offtakers awarded via tenders, the reserved volumes should be allocated to EIIs and not to other consumers. Member States should facilitate access to these contracts and mitigate the risks of residual budget exposure, for instance by issuing long-term services or acting as market makers.
Developing and implementing CfDs for offtakers is not a silver-bullet solution for restoring the competitive energy prices for EIIs. Coordinated action is needed across the entire value chain, where consumption profiles are matched with production. This approach should be pursued at the EU level and could be supported by a market aggregator or platform that acts as an intermediary between producers and consumers.